As a landlord, choosing the right location for your investment properties is crucial for your success in the real estate market. In 2023, two major cities in the United Kingdom, London and Manchester, continue to be hotspots for property investment.
Each city offers its own set of advantages and challenges, meaning deciding between the two can require deep consideration, and doing so will be highly unique to your individual needs and preferences as a landlord. In this comparative guide, we will delve into the key factors that landlords should weigh up when deciding between London and Manchester as their next property investment destination.
Before we do this, however, let’s talk about landlord insurance first. Although not a legal requirement, having landlord insurance is something that you can count on to help make the process of managing property much easier. Contact us, CIA Landlords, today to find out more!
Now that we have that covered, let’s take a look at different aspects that should be taken into account when comparing London to Manchester, such as:
- Property market overview
- Rental yields
- Entry costs
- Rental demand
- Regulatory environment
- Economic factors
Property market overview
The evergreen capital
London, the vibrant capital of the UK, has been a magnet for property investors for a very long period of time. It boasts a diverse range of property types, from historic townhouses to modern apartments, making it appealing to a wide range of tenants, like business people and creatives. The city’s property market is characterised by its stability and potential for high rental yields in some areas of London.
However, it’s essential to note that London’s property market can be prohibitively expensive for entry, particularly in prime locations like Kensington, Chelsea, and Mayfair. As a result, many landlords opt for buy-to-let properties in more affordable boroughs such as Barking and Dagenham, Croydon, and Bexley. Either way, investing in property in London can be a fruitful endeavour.
The rising star
In recent years, Manchester has emerged as a promising alternative to London for property investment. This lively city in the northwest of England has experienced significant growth, driven by a thriving economy, excellent universities, and a burgeoning tech sector. It’s no wonder that Manchester has become a great alternative to London.
Manchester’s property market offers investors lower entry costs compared to London, making it an attractive option for those looking to expand their property portfolios. Additionally, rental yields in Manchester have historically been strong, thanks to a high demand for rental properties, especially in popular districts like the Northern Quarter and Castlefield. Why wouldn’t you want to invest in Manchester?
Moderate yields in prime locations
London’s prime locations often command lower rental yields due to the high property prices. In areas like Kensington and Chelsea, landlords may experience rental yields of 2-3%. However, in more affordable boroughs, such as Barking and Dagenham, yields can range from 4-6%.
When looking to invest in property in London, you will need to take this into consideration as you may not receive the rental yield you are looking for, especially if achieving a high rental yield is your main goal as a landlord.
Competitive yields across the city
Manchester, on the other hand, consistently offers competitive rental yields, with an average yield of around 5-7%. The city’s strong demand for rental properties, driven by a growing population and a thriving job market, contributes to this healthy yield rate. Investors can find even higher yields in certain areas, such as student-heavy districts like Fallowfield. Do your research as a landlord and find out where would be the best place to invest in.
High initial investment
As well as rental yields, fully understanding the entry cost of investing in a certain place is key to the success of your property portfolio.
London’s property market is notorious for its high entry costs. Purchasing property in prime central London areas can require substantial capital, and even in more affordable boroughs, property prices can be steep. This poses a significant barrier to entry for some investors.
Affordable entry points
Manchester, however, offers much more affordable property prices compared to London. The lower entry costs make it easier for landlords to diversify their property portfolios or enter the market, especially as first-time investors. This affordability is a significant advantage for those looking to get started in the UK property market.
Stable demand across the board
As mentioned above, London consistently attracts a diverse tenant base, including professionals, students, and families. While rental demand remains relatively stable, it can vary depending on the borough you are looking at and the property type you want to invest in.
Prime locations tend to have consistent demand, but competition can be fierce. So, be ready for this if London is the place you want to invest in.
Strong and growing demand
Manchester’s rental demand has been on the rise, thanks to its growing population and job opportunities. The city’s thriving tech sector and numerous universities contribute to a steady stream of tenants. Landlords can benefit from Manchester’s strong demand by providing high-quality rental properties in sought-after neighbourhoods.
Understanding the regulations of the city in which you want to invest in is especially important. Being knowledgeable on this will be a massive competitive advantage for you as a landlord.
London has some of the most stringent landlord regulations in the UK. Landlords must adhere to various rules regarding safety checks, licensing, and tenant rights. This can be both a blessing and a curse, as it ensures a certain level of tenant protection but also requires landlords to stay well-informed and compliant. Although this seems to be extra work, knowledge is power.
Landlords can breathe a little easier in Manchester, as its regulatory environment for landlords is generally less complex than London’s.
However, landlords must still meet essential legal requirements, such as gas safety checks and tenancy deposit protection. Manchester’s more straightforward regulatory landscape can be an advantage for those looking for a less burdensome administrative experience.
The choice is yours!
London’s status as the UK’s capital ensures economic stability. It is home to numerous multinational corporations and financial institutions, providing a steady flow of professionals seeking rental properties. However, the city’s economy can also be susceptible to global economic fluctuations.
This is an important aspect to take into account when looking to invest in London. Always keep an eye out for what the economy is showing.
Economic growth potential
Manchester’s economy has been steadily growing, with significant investments in sectors like tech, healthcare, and transportation. This economic diversification offers landlords the potential for long-term growth, as the city continues to attract businesses and residents alike. For many years to come, there will be endless opportunities for landlords, as the market is far from saturated!
Will you go north or south?
In 2023, both London and Manchester remain attractive options for landlords looking to invest in the UK property market. Each city offers a unique set of advantages and challenges, making the decision between the two will depend on your investment goals and risk tolerance. Personal preference is key when making big decisions such as these.
London, as the capital, provides stability and access to a wide tenant base, but it comes with higher entry costs and stricter regulations. Manchester, on the other hand, offers more affordable entry points, competitive rental yields, and a growing economy, making it an enticing option for both new and seasoned investors.
Take the time to conduct your market research more in-depth before committing to something you may regret at a later stage. Ultimately, your budget will be a big deciding factor when wanting to invest in property. One thing you can be sure of, however, is that landlord insurance prices at CIA Landlords cannot be beaten, get a quote today to find out for yourself! Contact us today for more information about what we offer.