This year is set to be bleak for landlords, with a slew of new legislation sending shockwaves through the buy-to-let market.

But away from new rights for renters, changes to energy performance certificates and hikes to stamp duty surcharges, impressive returns can still be made – you just have to be savvy about where you buy property.

A study of 50 UK cities shows where’s wise to invest – and where’s best avoided.

Landlords often just look at the ‘yield’ – the annual rental income as a percentage of a property’s value – to decide if it’s a good buy. But other factors can have a big impact, too.

In its study, Aldermore Bank rated each city by key factors: how house prices have grown in the past decade, the average rent per room, the size of the private rental market, the proportion of empty properties. 

And, of course, the yield. Since Aldermore’s survey last year there have been many changes in the rankings, as the market suffered headwinds.

Demand from tenants is growing in some areas as landlords exit the market – driven out by higher mortgage costs and legislation.

The Renters’ Rights Bill is set to ban Section 21 evictions, making it harder for landlords to regain possession of their properties. 

Rules to upgrade all Energy Performance Certificates (EPC) to band C by 2030 have been announced. The stamp duty second home surcharge was hiked from 3 per cent to 5 per cent last October.

Yet mortgage rates are dropping, making buying properties with loans more affordable.

Jon Cooper, head of mortgages at Aldermore, says: ‘Landlords are seeing a unique set of challenges. They need to be on the ball, reviewing their portfolios.’

Manchester in top spot 

Knocking Bristol off the top spot, Manchester has taken the crown as the UK’s most attractive city for investment this year.

Monthly rents per room are healthy at £550 – higher than average but still affordable compared with London and Edinburgh.

Yet rental yield in Manchester is modest. It’s 0.1 percentage point lower than the average across the 50 cities at 6.8 per cent, partly due to a higher average house price of £243,560.

Jason Harris-Cohen, Open Property Group founder, says yield is important for landlords as it is essential for cash flow and returns, but property price growth is also crucial.

Price growth is where Manchester scores. It has soared by an annual average of 6.5 pc in the past decade – the highest of the 50 hotspots. And it’s good for long-term investors.

Almost one in three Mancunians rents privately, meaning there is a dependable tenant base. Just 0.7 per cent of properties are vacant as there’s a healthy demand.

Ellie Hey of Belvoir lettings in Manchester says the vibrant city centre – into which huge amounts of investment have been poured – is attractive to young professionals.

Glasgow and Coventry still strong 

Glasgow comes second place in our league tables. Coventry is third. The Scottish city’s high rental yield is attractive to investors says Grace Reilly of letting agents Retties.

Its yield is a huge 9.8 per cent, the second most attractive of the 50 UK cities. 

Average rent per room is £565, higher than the £518 UK average, which nets investors £17,616 for an average property a year. Coupled with a low average house price of £179,225, it means landlords can recoup their investment fast.

Ms Reilly saw the market cool more than usual before Christmas, but adds: ‘The Glasgow buy-to-let market will be steady to strong this year.’

There’s steep competition for properties as just 0.9 pc of Glaswegian homes are vacant.

Coventry retains third place. The city is just an hour’s drive from Birmingham and an hour by train from London.

Yields are above average at 7.9 per cent while property prices have risen by an average 5.1 per cent a year since 2014. Some 1.1 per cent of rentals are empty, signalling over-supply.

Wigan climbs high

After climbing 21 places in a year, Wigan has reached fourth spot. Last year, the town was let down by a 7.2 per cent yield but landlords can now net 8.5 per cent due to its affordable house prices – an average £189,476 – and rising rents.

Laura Gill, of Wigan lettings agents Regan & Hallworth, says: ‘Low house prices have made Wigan an attractive place for landlords compared with some bigger towns and cities.

‘For tenants, the town has good motorway links to both Liverpool and Manchester, but rents are cheaper so young professionals and workers with families

can commute.’ Rent is reasonable at an average £496 a month for a room. But landlords looking for an attractive investment should beware – just 16 per cent of Wigan’s residents rent privately so there may not be a large pool of tenants.

Hull tops yields 

Landlords hunting for yield above all else may want to consider Hull. It offers a huge 10 per cent average yield.

While the average rent per room is £463 a month – or £13,893 a year – average house prices are low at £138,770. This means landlords can make their money back more quickly.

Malcolm Davidson, buy-to-let broker at Hull Moneyman, says: ‘It’s a fairly stable market.

‘The high yields will come from terraced Victorian properties priced at £60,000 to £80,000.’

But Hull comes at just number 25 on the hotspot list due to poor property price growth and a high percentage of vacant properties.

Yield chasers can also find good returns in Aberdeen, where investors see an average 9.5 per cent yield. But be warned – it scores so poorly in other metrics that it falls to number 47 in the rankings.

It is let down by the fact it is the only city where house prices have fallen over the decade.

Plus, some 4.7 per cent of properties in the city are vacant, meaning there isn’t a soaring demand for homes.

Landlords should avoid the university city of Cambridge as it has the poorest yield.

While monthly rents are £670 for a room, an average of £20,898 for a typical property, high house prices of near £500,000 mean investors see just a 4.4 per cent yield on average.

London plummets

The capital has dropped 27 places to spot 32, due to a drop in property price growth. Prices have risen by only 3 per cent a year on average over the past ten years.

Monthly rents per room are the highest at some £800. The average house price is close to £520,000, meaning yields are just 4.5 per cent.

Marc von Grundherr, of lettings agent Benham & Reeves, says: ‘London will never top the league tables of buy-to-let cities as high yields are near impossible. But strong demand for rentals remain.

‘Investors should generally avoid older houses which require expensive maintenance.’

Poor performers

Welsh cities Swansea and Newport again take spots 50 and 49 as monthly rents are the lowest at £373 and £304, respectively.

Swansea has a modest yield of 6.3 per cent but is let down by poor house price growth (4.3 per cent) and a private rental sector made up of just 17 per cent of residents.

Newport outpaces other cities on house price growth – with an average annual rise of 5.5 per cent – but scores poorly for yield at 4.4 per cent.

Sunderland occupies spot 48 as it boasts a strong 8.9 per cent yield but every other metric lets it down.