Cardiff at no.5 in the top 10 buy-to-let hotspots

It’s recently been reported that portfolio landlords have been focusing their investment efforts in towns and cities in the Midlands and North of England.

8 out of 10 hotspots are currently in the North

According to analysis by Paragon Bank, Cardiff ranks at number 5 in the top hotspots for landlords to invest, with Northern cities including Manchester, Birmingham, Durham and Nottingham dominating the top spots overall. Brighton & Hove is the only southern location to scrape into the top 10.

This isn’t surprising, given that portfolio landlords tend to have HMOs and other student lets making up at least part and all the cities including Cardiff have a significant student population. In addition, these regions have cheaper prices, so landlords are able to make their capital go further, and yields tend to be higher than in the more expensive southern parts of England.

Another possible reason for this increase in investment is the impact of the 3% higher rate stamp duty that applies to additional property purchases.

Looking at all buy-to-let investments made in a year, Paragon’s research showed that the proportion of rental homes bought in the South fell from 52% in 2015 to just 35% in 2023.

Should I be investing in these ‘hotspots’?

One of the most common questions we get from landlords and new investors is: “Where’s the best place to buy?”. And with the media frequently publishing articles about the latest ‘hotspots’ (which can change from one season to the next!), it’s easy to believe that the best deals are only to be found in certain, very specific locations.

In terms of good capital growth, areas that are experiencing regeneration and benefitting from new investment in infrastructure and business might perform better than more established locations for a few years. But these ‘up and coming’ areas often have lower rents because they’re not yet considered desirable, so they won’t necessarily fit every landlord’s financial goals.

The reality is that there are good deals to be found in almost every town and city, and if you’re looking to make a solid 15-year plus investment, you don’t necessarily need to chase trends up and down the country.

Cardiff is a great location for investment as it isn't as expensive as places in the South of England, but is more established (and therefore commands higher rents) than some areas in the North.

Buy-to-let fundamentals remain the same

The fundamentals of what makes a successful buy-to-let remain the same, and these are the three key questions you need to ask before choosing a property to buy:

1. Will it deliver on my objectives? How long you plan to hold the property; whether your primary goal is income or capital growth; the type of tenants you want; whether you intend to pass the property on to family, etc. – you need to find a property that satisfies all your investment criteria.
   
   
2. Will the property let well now and into the future? You need to carry out solid research and consult with local buy to let property experts, to be as sure as you can that there will be a continuing demand for this type of property. You don’t want to find yourself satisfying a short-term trend and your returns suffering in a few years’ time.
   
   
3. Can I buy at a discount or immediately add value? Being able to buy at below the true market value of a property means you gain instant ‘in-built’ equity. Alternatively, you could buy something that needs work, where the resulting increase in value will be significantly higher than the money you’ve had to spend. Either way, this immediate equity boost should give you a good cushion against any market fluctuations, or you may be able to refinance to release some if not all of your deposit capital, which will boost your return on investment.

If you’d like to discuss your investment objectives and find out about properties in your area that could be a good match, just get in touch with your local branch - our team of experts will be very happy to help.