Buy-to-let Urban vs. Rural: How Can Landlords Choose Between the Two?

Suddenly, tenants and buyers found they could work from anywhere. City dwellers squeezed into tiny flats started to dream about rolling hills and leafy gardens.  We explored these shifting priorities in our 2021 Homebuyer Wishlist report. Our research found that outdoor space, larger square footage, and bigger gardens were the key priorities for people as we moved through the pandemic. To find these features, many looked to rural and urban areas.

Many are still looking to the countryside for salvation as flexible working remains prevalent. Landlords can take advantage of this but before taking any action, they’ll want to understand the difference between rural and urban locations, and what opportunities each bring to the table.

Officially, the Government defines rural areas as those that fall outside of settlements with more than a 10,000-resident population. Small villages being an obvious example. Urban areas include larger cities and towns, or suburbs which grant commutable access to a major city. For instance, Surrey has several suburbs which provide easy access to London.

Before answering the buy-to-let urban vs rural question, landlords should know the variables between the two. Both options proved popular throughout the pandemic, but there are key differences to note.

Source: Gov.uk

What potential do the nation’s villages hold?

Rural demand skyrocketed during the pandemic. Annual price growth rose to the highest level seen since the 2008 crisis in the first three months of 2021. In prime locations, prices were up 6.7% in the year to March 2021. Even now, as the worst of the pandemic lays behind us, there is fierce competition for the UK’s “golden villages”. Being seemingly immune to the country’s economic problems, bidding wars have led to offers several thousands of pounds over asking prices.

Yet, while property prices in the most prime locations can reach eye-watering levels, some rural locations can present investors with a bargain. County Durham, the historical town featuring a medieval castle and ancient university, has an average property price of just over £122,000.

There could also be plenty of rental opportunity for investors who know where to look. Savills’ housing market update for August noted London boroughs saw the strongest annual growth to May, but over half of this had been making up for rental falls during the pandemic. Indeed, the greatest rental growth since February 2020 has been seen in the tiny Welsh borough of Blaenau Gwent. Here, rents rose by 32.1%.

Source: Knight Frank, Mirror, Money.co.uk, Savills

Many people still need to be near their cities

While some have found themselves in a position where they’ll never (or rarely) need to go back into large cites like London or Manchester, many workers still need to head into the office. At least, for a few times a week. In the capital, six in 10 workers say they’re now hybrid working, spending at least one day working from home, according to King’s College London.

For workers who wanted a bit more space, while still needing to be near the office, the suburbs presented a perfect balance. Indeed, millennials abandoned London en masse for the capital’s outer echelons during the pandemic.

While typically not being as spacious as rural areas, the nation’s suburbs still have plenty going for them. The world’s urban population is expected to continually rise each year to 2030, while major UK hubs such as London, Bristol, and the West Midlands are projected to have particularly high population growth rates over the coming years. Overall, England’s urban population has been growing faster than the rural population.

As these populations grow, so too will development projects. These typically boost property prices and tenant demand. The recently completed Crossrail project being an obvious example, which raised prices in newly created commuter belts.

Source: King’s College London, The Telegraph, Gov.uk, Yahoo Finance

How can investors narrow down the choice?

For landlords, buy-to-let – urban vs rural – is almost a pointless debate to have. Both are viable options for investors. The key differentiator will likely be what age groups are targeted and catered to. In late 2021, the Department for Environment Food & Rural Affairs found that 25.4% of the rural population was aged 65 or over. Only 17.1% of the urban population fell into this bracket.

Those wanting to target older renters would likely have better luck in rural areas. At first glance, this may seem counterintuitive. Many may think that most renters are young. However, older generations have been revealed to be the fastest growing group of renters. Between 2011 and 2021, a 110% increase was seen in the number of households privately renting, where the household lead was aged between 55-64.

At the same time, younger generations are expected to cough up record amounts for their rents over the coming months. In 2022 alone, Generation Z, those born between 1997 and 2012, are expected to pay £11.7 to their landlords. For many young adults, the prospect of buying their own home at all seems doubtful. Investors seeking out the highest yields may want to stick with the suburbs.

Of course, investors can ignore the buy-to-let urban vs rural question entirely by sticking with city-based properties. Ultimately, investors will need to ask themselves multiple questions before making any decisions, and not exclusively focus on location.

Source: Gov.uk, Property Reporter, Letting Agent Today, i news