England | Data Analysis

A comparative analysis of rental returns for 1-bedroom units Birmingham, Manchester and London

March 04, 2019 | by Pauline Lim
          London asking rental price distribution
          Y: rental price per week(pw),   X:London district code

Summary

  1. The median weekly asking rent for 1-bedroom units in Birmingham, Manchester and London are £168, £178 and £334 respectively.
  2. The median asking sale price for 1-bedroom units in Birmingham, Manchester and London are £178k, £165k and £400k respectively.
  3. W6 showed a positive cashflow yield for 1-bedroom units compared to the other districts in London in the £400k price range.

In 2019, returns from rental investment would likely prove to be attractive relative to returns from stocks and bonds. The stock market is facing significant uncertainty and increased volatility. Two major geopolitical events involving the world’s developed economies might make some investors wonder if there are better options for their savings. Yet, the low interest rate environment makes investments in bonds less attractive. However, landlords would enjoy low-cost financing and rentals provide consistent and stable income.

When we look at rental income for 1-bedroom units in Birmingham, Manchester and London, we see that the median weekly asking rent are £168, £178 and £334 respectively. To have a better idea of rental yield, we need the median asking sale price for 1-bedroom units in these 3 cities. We see that the median asking sale price are £178k, £165k and £400k respectively. After taking the costs of holding and maintaining the units into consideration, W6 showed a positive cashflow yield for 1-bedroom units compared to the other districts in London in the £400k price range.

W6 is to the north of River Thames and this is the neighborhood known as Hammersmith. The 2011 UK census indicated that this is the country’s sixth most densely populated are with a density of 111 people per hectare. The age profile of its constituents is typical of an affluent urban population with fewer people near the retirement age and a lower level of younger children, with only 16.2 percent of its population under 16. The housing stock in this area is characterized by a large proportion of flats and maisonettes, standing at 69.5% compared to a London average of 52.2%. These numbers make up one of west London's key transport hubs, as well as a major commercial and employment centre.












































































































On Jun 2005, a new infrastructure project, the Downtown Line (DTL), was announced by LTA. At this point in time, details of the stations were yet to be finalised.

On 27 April 2007, phases 2 and 3 of DTL were announced.

Stations under consideration (DT3-DT8) were opened on 27/12/2015, after 8 years of construction.

To track the effect of the announcement and commencement of the DTL on private property prices, three indexes were created via the classic hedonic approach:

  • - DT: private condos and apartments within 500 meters from the newly announced MRT stations (DT3 - DT8)
  • - districts: All private condos and apartments in Districts 10/11/21/23 in which the selected MRT stations locate
  • - all: All private condos and apartments island wide

This chart shows that a new train line has a positive effect on the prices of private property.


This chart shows the excess return for private property near the stations compared to private property in other parts of Singapore.

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