CIA Landlord has revealed its annual ranking of the best UK cities to buy to let for 2021, with some areas proving to be more profitable than others. The analysis is based on the average property price, mortgage cost, average rent income, and the monthly costs of being a landlord to calculate the monthly profit. Listed are the 10 cities with the highest monthly earnings for landlords.
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Brighton Average property price: £410,541. Average rent: £2,044. Monthly mortgage cost: £1,411. Monthly profit: £571.85
Bangor Average property price: £185,833. Average rent: £1,193. Monthly mortgage cost: £639. Monthly profit: £500.53.
Portsmouth Average property price: £243,945.. Average rent: £1,379. Monthly mortgage cost: £838. Monthly profit: £479.27.
Leeds Average property price: £228,424. Average rent: £1,323. Monthly mortgage cost: £785. Monthly profit: £477.60.
Lancaster Average property price: £210,979. Average rent: £873. Monthly mortgage cost: £725. Monthly profit: £474.54.
Bristol Average property price: £344,667. Average rent: £1,699. Monthly mortgage cost: £1,184. Monthly profit: £453.20.
Coventry Average property price: £209,309. Average rent: £1,213. Monthly mortgage cost: £719. Monthly profit: £432.27.
Manchester Average property price: £200,517. Average rent: £1,176. Monthly mortgage cost: £689. Monthly profit: £425.48.
Nottingham Average property price: £225,917. Average rent: £1,248. Monthly mortgage cost: £776. Monthly profit: £410.21.
Salford Average property price: £172,622. Average rent: £1,048. Monthly mortgage cost: £593. Monthly profit: £393.33.
One in 10 landlords plan to purchase buy-to-let properties this year, up from 3% at the end last year, Source Business research shows.
The rise in landlord confidence and a change in tenant priorities following the lockdowns is leading investors to a move away from London and the South East, to less built-up areas.
Increasingly tenants want greater home working space and leisure time, resulting into a spike in demand for larger properties.
Mish Liyanage, managing director of The Mistoria Group, said: “We are seeing a rise in professional landlords looking to acquire affordable terraced properties with gardens and apartments in the North West. Lower prices, high yields, expanding population and Northern Power house initiative/HS2 have contributed to this interest.
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“A significant proportion of the professional landlords that we work with are located in the Midlands and the South, but want to invest in the North West, because of the attractive property prices, high yields and occupancy rates. Many investors are moving away from London and the South East and are searching for regions that give them exceptional returns.”
At the end of 2019, 82% of landlords claimed that they had no plans to acquire another property in 2020, while just 3% were intending to add more than a single property to their portfolio.
Soon after the stamp duty holiday was implemented, 10% of landlords said they are now planning to purchase more properties and build on their portfolio, while just 5% said they had any intention to sell any existing properties.
As the final quarter of 2020 begins – following an unprecedented six months – the buy-to-let (BTL) market is bouncing back strongly, in a way that few commentators predicted a few months ago, in my opinion.
The residential and buy-to-let markets both felt a significant impact during the initial stages of the pandemic. Public health measures made it difficult for surveyors to visit properties, contributing to nearly two months of disruption in the housing market. However, since property valuations became possible again, demand has returned, and the UK property market is demonstrating its resilience.
It has quickly become apparent to me that landlords and investors have not lost their appetite within the buy-to-let sector either. Demand for new tenancies has risen and historically such increases have often continued when supported by a growing market for property sales, as we are seeing now. The Chancellor’s stamp duty cut has further fuelled interest.
In fact, by July the number of new tenancies was nearly back to pre-pandemic levels, according to The Deposit Protection Service’s (DPS) quarterly Rent Index.
Most of the growth in new tenancies has been at properties owned by professional landlords, and we expect to see this trend increasing. Professional landlords with reliable portfolios of good properties are often in a better position to absorb financial shocks.
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According to the Savills Global Market Sentiment Survey, concerns over the pandemic are driving more UK residents to seek properties in rural locations.
The rise of home working means there are fewer benefits in living close to workplaces, particularly those in city centres. More people seem to be taking up the chance to find a property with a garden or a garage – or simply a bigger home, whether to accommodate greater home working or simply to enjoy more space. Such properties are more plentiful in the shires, meaning demand in urban areas may continue to fluctuate.
The Royal Institute of Charted Surveyors’ (RICS) August survey found that 83% of surveyors in the UK anticipate greater demand for homes with gardens or balconies in the next two years and that 68% expect the desirability of properties with a ‘more private’ outdoor space to grow. The increased demand for properties with specifically ‘roomier’ features has led to confidence in the housing market rising to a four-year high.
Overall, I believe this represents a relatively positive picture for brokers, professional landlords and buy-to-let investors. The fact that rates are low, loan-to-values (LTVs) are almost back to pre-pandemic levels can only go to support this positive picture.
Demand for rental properties is likely to increase in many areas, as renters seek tenancies with more than just ‘a room with a view’ to make staying and working at home more comfortable.
A new study has revealed that Salford is the most profitable buy-to-let city for landlords, following the stamp duty holiday pushing UK house prices to an all-time high.
The research by CIA Landlord reveals that Salford, with an average house price of £173,311 and average rent prices of £1,052 per month, is the best city for landlords looking to buy a new property for buy-to-let purposes.
CIA Landlord calculated the best cities for buy-to-lets under the Government’s latest stamp duty holiday by analysing the average house price, rental price and stamp duty savings in every UK city for the cheapest home prices and highest rental yield in order to calculate profitability.
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Manchester follows closely behind Salford with house prices averaging at £193,681 and rental incomes at £1,141 per month. Leeds, Portsmouth and Belfast also feature in the top five buy-to-let hotspots.
High Wycombe in Buckinghamshire ranked as the worst city for landlords purchasing a buy-to-let property, with average house prices reaching £430,891 and rental prices averaging at £945 per month. Cambridge also saw low profitability margins, with average house prices at £448,432 and rental income averaging £1,080 per month. Reading, Worcester and Watford also feature on the bottom of the table in terms of profitability.
In the capital, Havering was the best borough for profitability according to the study, with house prices averaging £395,832 and monthly rental prices reaching £1,895. Alternatively, with average house prices reaching over £2m and average monthly rent coming to £4,003, properties in Kensington and Chelsea see the lowest profitability margins.
Landlords who sold properties in 2019 typically owned the home for 9.1 years and sold it for £78,100 more than they paid for it.
People selling in London made the biggest gains, with the average London landlord making £253,580, over 20 times that of a seller in the North East (£11,710).
Research from Hamptons International found that 84% of landlords who sold their buy-to-let property in England and Wales last year made a gross capital gain, with only 16% making a loss.
Aneisha Beveridge, head of research at Hamptons International, said: “The profitability of the buy-to-let market has been questioned in recent years and is one of the main reasons why some landlords have chosen to sell up.
“But one of the biggest bonuses from cashing in comes from the capital gain on a property. Over a third of landlords’ total return comes from capital growth rather than rental income in Great Britain.
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“Landlords in the South, where house prices are higher and historic price growth has been stronger, saw the greatest capital gains last year. In fact, the average London landlord gain was over 20 times that of a seller in the North East where landlords are more reliant on rental income.
“But with house price growth expected to stay lower than in the past, more landlords are having to switch their focus to maximise rental income, rather than rely on capital growth.
Last year an estimated 150,000 properties were sold by landlords in England and Wales.
Beveridge added: “The profitability of the buy-to-let market has been questioned in recent years and is one of the main reasons why some have chosen to sell up.
“But one of the biggest bonuses from cashing in comes from the capital gain on a property. Over a third of landlords’ total return comes from capital growth rather than rental income in Great Britain.”
Moneyfacts UK Mortgage Trends Treasury Report data, not yet published, reveals that there are glimmers of hope emerging for the Buy to Let mortgage market, following the significant initial impact of the Coronavirus pandemic. In welcome news to many landlords, the choice in products has increased, and some higher loan-to-value (LTV) average rates have reduced. These shifts are likely to be linked with lenders’ focus on supporting existing borrowers alleviating and of course the Government guidance on valuation restrictions lifting.
Overall, there are 280 more BTL products available now than there were at the start of May 2020. The product choice at 75% LTV has increased by 46 two year fixed rate deals and 54 more products are available in the five year fixed rate bracket. The picture at 80% LTV is similar, with this traditionally smaller sector increasing by 26 two year fixed rate products and 20 more options available for those seeking a five year fixed rate over the month.
Average interest rates on fixed BTL mortgages have risen slightly for two and five year fixed rates overall, likely due to the increase in the number of products that these averages are based on. However, there is cause for celebration for landlords who have only a 20% deposit available, as rates on both two and five year fixed rate BTL products at 80% LTV have reduced, by 0.49% and 0.67% respectively, which will be great news for those considering purchasing or at remortgaging at this LTV.
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Buy-to-let market analysis
Product numbers
May-20
Jun-20
Difference
BTL product count (fixed and variable)
1455
1735
280
Two-year fixed rate BTL all LTVs
491
597
106
Two-year fixed rate BTL at 75% LTV
165
211
46
Two-year fixed rate BTL at 80% LTV
9
35
26
Five-year fixed rate BTL all LTVs
480
607
127
Five-year fixed rate BTL at 75% LTV
176
230
54
Five-year fixed rate BTL at 80% LTV
6
26
20
Average rates
May-20
Jun-20
Difference
Two-year fixed rate BTL all LTVs
2.51%
2.59%
0.08%
Two-year fixed rate BTL at 75% LTV
2.60%
2.64%
0.04%
Two-year fixed rate BTL at 80% LTV
3.61%
3.12%
-0.49%
Five-year fixed rate BTL all LTVs
2.94%
3.03%
0.09%
Five-year fixed rate BTL at 75% LTV
3.15%
3.17%
0.02%
Five-year fixed rate BTL at 80% LTV
4.32%
3.65%
-0.67%
Source: Moneyfacts Treasury Reports. Data shown is as at the first of the month unless otherwise stated.
Eleanor Williams, Finance Expert at Moneyfacts, said:
“The Bank of England base rate currently remains at its lowest ever level of 0.10%, resulting in further despair for savers. However, those looking to invest their money in property now that the mortgage market has reopened may feel now is a good time to explore their options, particularly with rates becoming more competitive and product choice beginning to return this month.
“A recent survey from Rightmove, which was conducted as the property market reopened at the end of May 2020, revealed that demand from tenants for rental properties increased by 33% when compared to the same time period last year. Therefore, the increase in buy-to-let product choice will be welcome news to landlords.
“This positive growth in choice is reflected in the higher LTV tiers, with deals for landlords with just a 25% or 20% deposit or equity keeping pace across two and five-year fixed rate options. This is encouraging considering that early in the Covid-19 crisis, providers were focused on supporting existing customers and restrictions meant that physical valuations were not feasible, seeing many lenders reduce their offerings to lower risk, lower LTV products. These developments left those with less equity or deposit un-catered for.
“Average rates have increased slightly over the last month, likely impacted by the higher number of mortgage products available from which this average is calculated. The overall two-year fixed rate sees a 0.08% rise, while the five-year fixed equivalent increased by 0.09%. However, landlords who may be concerned about increasing mortgage rates will be heartened to see that at 80% LTV, the two-year fixed average rate has dropped month-on-month. In this same bracket, those looking for longer-term protection from interest rate volatility and considering locking into a five-year fixed rate deal will also find rates have fallen over the same period – which sees it sit lower than the March 2020 figure of 3.98% as a result.
“As we begin to see indications that the buy-to-let market may be starting to recover, the full economic impact of the current crisis is still not yet clear for tenants and landlords alike. However, those who are in a position to consider capitalising on possible falls in house prices to expand their property portfolios or indeed those looking to switch their current deal, may wish to move quickly. If they do decide to make a move, they would be wise to seek advice from an independent, qualified financial adviser regarding their options, as criteria and requirements continue to be updated.”
Rental housing is likely to prove more resilient during this downturn than other real estate sectors, and landlords should therefore use this opportunity to invest in buy-to-let (BTL) properties, according to residential property consultancy Ringley Group.
Mary-Anne Bowring (pictured), managing director at Ringley Group, as said that people are more likely to rent than buy during a recession, and rent is typically one of the last things people stop paying during financial hardship.
Bowring said: “There is a huge opportunity still for buy-to-let investors in the UK rental market, which is only predicted to grow in size.
“That’s why institutional investors such as pension funds and insurers are investing billions in building homes for rent, as they see an opportunity to secure income-producing investments that hold up well during a downturn.”
Once the current crisis passes, pre-lockdown trends, including the predicted rise in the number of renters, will also continue.
This is due to affordability, changes in lifestyle and the job market, fundamentals which will remain post-virus.
To stimulate housing market activity and help landlords invest in BTL properties, Ringley has called for the government to exempt landlords from the stamp duty surcharge on second homes.
Bowring said: “Government efforts to restart the housing market should reflect long term pre-existing trends and that includes the continued growth in private renting.
“If the government wants to kill two birds with one stone – boost activity in the housing market and provide much needed rental homes – it should exempt landlords from the second home stamp duty surcharge immediately.”
In response to the growing demand for rental properties, as well as the effects of the COVID-19 lockdown, Ringley recently brought forward the launch of its automated lettings platform, PlanetRent.
Bowring said: “Proptech is evolving lettings fast as tenants must be seen as customers and the expectation is a frictionless, fully loaded experience, including immediate service which automation allows.
“It is important that buy-to-let landlords learn from institutional landlords to not fall behind the latest trends.”
Some 42 of the 49 buy-to-let lenders operating at the beginning of March are still lending despite the impact of coronavirus, analysis from Mortgages for Business shows.
Together Money and Vida Homeloans have both pulled out of the market, while HSBC is no longer accepting buy-to-let applications.
However Santander, Clydesdale, Precise Mortgages and Kent Reliance have now restarted lending, after initially taking a step back.
Shawbrook and Paragon meanwhile are using virtual valuations against standard properties up to 75% loan-to-value.
Steve Olejnik, managing director of Mortgages for Business said: “Lenders have cut down the sorts of landlords that they will lend to.
“They’re pulling product ranges, tighten lending criteria, and increasing margins. But different lenders are derisking against different kinds of landlord borrowers. So, while some lenders are no longer lending to first time landlords, there are still lenders who are.
“My advice to landlords looking to remortgage is act sooner, rather than later. You may have to answer a few more questions when you’re applying for a remortgage that you would have had to last month – but a broker will still be able to find you a deal.”
Saffron Building Society withdrew from the market before the outbreak in March, though the lender has indicated that it will return to the market later in the year.
Lenders that have stopped lending to landlords since include: HSBC; Foundation Home Loans; Together Money; Vida Home Loans; Platform Home Loans; State Bank of India; and Furness Building Society.
Successful buy to let property investment can often depend on location – North, South, or the Midlands.
The latest research from peer to peer lending platform, Sourced Capital, has looked at where’s best to invest in bricks and mortar across the north, south and midlands regions of Britain.
Location can be vital when investing in property and regional influences can make the difference between profit and loss, so Sourced Capital has dissected the market based on the value of a property and the total value sold, as well as demand for these properties based on the volume of transactions.
The North-South divide is a very contentious issue but with the Midlands becoming a property powerhouse in its own right over the last few years, Sourced Capital totted up the totals based on: –
The North including the North West, North East, Yorkshire and the Humber and Scotland.
The South including the East of England, London, the South East and South West.
The Midlands including the East and West Midlands and Wales.
The figures show that despite much talk of the Northern Powerhouse, the South remains in pole position where the property market is concerned. In the last 12 months, house prices across the South have averaged £335,567 with £132.7 billion worth of property sold across 401,606 transactions.
The North doesn’t trail by much when it comes to the churn of property sales though, with 333,262 transactions over the last month, although the value of these properties is significantly lower with the average property going for £152,276 with a total value of £52.1 billion.
The Midlands and Wales accounted for the lowest level of transactions at 203,586 and while total value also trailed at just £38,4 billion, the average house price does exceed that of the North at £185,241.
Stephen Moss, founder and MD of Sourced Capital, commented: ‘When it comes to the sheer volume of transactions and the value of bricks and mortar, the South continues to lead the way and while this is largely driven by London, each region provides an attractive proposition when it comes to investing from both a demand and value point of view.
‘However, the North isn’t far behind when it comes to demand for housing and with the exception of the North East, it’s fair to say the property market across the majority of the North and even parts of the Midlands can go toe to toe with the South on transaction volume.’
Research by online mortgage broker Property Master has revealed that the cost of all the fixed rate buy-to-let mortgage categories it tracks are down year-on-year.
Some rates have fallen by nearly £50 per month, which represents a saving of almost £3,000 over the course of a 5-year fixed rate mortgage.
Angus Stewart, chief executive at Property Master, said: “Another fall in the cost of borrowing is very good news for landlords.
“We know that there are landlords languishing on expensive SVR mortgages as the uncertainty around Brexit and political instability has put them off moving on to a more competitive fixed rate.
“With the current record low rates on offer these landlords should act quickly because if the “Boris bounce” becomes a reality it may allow interest rates to begin to rise back to more normal levels.”
“We are expecting a particularly busy next few months.
“This April it will be four years since significant changes were made to Stamp Duty.
“The decision by the then government to slap on a 3% surcharge on buy-to-let properties led to a mini-boom as landlords rushed to buy properties to beat the deadline.
“We suspect many of those landlords will be coming to the end of fixed rate mortgages around now and should be pleasantly surprised at what the market is prepared to offer them in terms of a good deal.”
Property Master’s February 2020 Mortgage Tracker shows the biggest year-on-year fall in cost was for 5-year fixed rate buy-to-let mortgage offers for 65% of the value of a property.
The monthly cost of a typical £150,000 mortgage for 65% of the value of the property fixed for five years fell by £48 per month between February 2019 and February 2020.
Year-on-year falls for 2-year fixed rate buy-to-let mortgage offers were more modest.
The cost of a typical 2-year fixed rate mortgage for £150,000 for 75% of the value of the property was down £25 per month year-on-year and for 65% of the value of a property by £19 per month.
However, both categories are at the lowest level they have been since Property Master began tracking rates in April 2018.
