If you are looking for a new investment in 2018 you should consider Cardiff, Nottingham or Liverpool according to the latest edition of Private Finance’s buy-to-let hotspots analysis.

The three cities are best for buy-to-let investors looking for the best returns; they have been crowned the best performing with the highest net Rental yields with an average of 6.2%.

According to this analysis, Liverpool has retained its spot since the last study, which was conducted in May 2017. The rental prices have fallen across the area leading to lower rental yields however Liverpool still dominates the table with a healthy yield of 6.2%. With a student population of 70,000 Liverpool is a popular destination for those in higher education creating opportunity for investors.

Nottingham however rivals Liverpool with a rental yield of 6.2% also, the city has moved up to second place due to an average increase of £121 in monthly rent prices.

Rising four places in the table is Cardiff with an average yield of 6% again due to an increase in average monthly prices from £946 to £1,301.

Read more: UK property market: The changes affecting you in 2018

In the top five are also the cities of Southampton, which was 11^th in May 2017 and Greater Manchester in joint fourth rising from fifth place. Both of these locations offer an average rental yield of 5.9%.

Across the top ten, rental yields have risen on average 0.9% since May 2017 and Southampton has witnessed the biggest increase of 2.2%. The growth is due to rents rising faster than house prices with 20% rents increase vs. 6% increase in house prices since May 2017 across the table.

Top ten buy-to-let hotspots:

1: Liverpool – 6.2%

1: Nottingham – 6.2%

3: Cardiff – 6.0%

4: Southampton – 5.9%

4: Greater Manchester – 5.9%

6: Coventry – 5.4%

7: Edinburgh – 5.2%

8: Leicester – 4.8%

9: Brighton & Hove – 4.7%

10: Bournemouth – 4.6%

These yields are partially due to falling mortgage rates, as the Bank of England (BOE) increased average mortgage rates in November 2017 for the first time in 10 years to 0.5%. As a result landlords across the UK will have seen their annual mortgage costs fall. Within the top ten, Brighton & Hove have seen the greatest reduction in mortgage costs.

Read more: The North West of England remains the best region for buy-to-let investors

The Director of Private Finance, Shaun Church, comments on the report: “Finding the right buy-to-let location is a careful balancing act. Too large an initial investment makes it difficult to achieve a healthy yield, but landlords must also be confident that property values will appreciate at a higher rate than mortgage borrowing to achieve a long-term profit. Strong rental demand is also key to prevent lengthy void periods that can damage affordability. While there has been some movement in the top ten buy-to-let hotspots, larger cities and university towns tend to offer the greatest opportunity for investors, as they offer the highest rental demand.”

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