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.
Northern cities may dominate the tables for house price growth but a different picture is emerging for the rental market.
New analysis claims to have uncovered the best UK cities for a landlord’s buy-to-let investment.
The research by Aldermore assesses and provides a score for the average rent per room per month, short-term yield for a new buy-to-let purchase, average property price rises over the past 10 years, proportion of vacant properties in a city and size of the private rental market across the UK.
Seven of the top 10 cities for landlords were in southern England while only three northern cities – Manchester, Liverpool and Newcastle – make the top 25.
Yorkshire has three cities in the bottom six while Nottingham was the only city from the Midlands in the top 10.
Despite having among the lowest short-term yields, Oxford comes out on top with the highest overall score in the index of 74.
Manchester and Edinburgh are just behind with 72, and London has 71.
The research shows London ranks first for total rents, while Liverpool has the best short-term rental yields.
Cambridge got the highest score for price growth while Cardiff and Oxford were the best areas for low vacant stock.
Damian Thompson, director of mortgages at Aldermore, said: “Aldermore’s Buy to Let City Tracker shows there are still great short- and long-term investment opportunities for landlords.
“The number of people renting in the UK has been rapidly growing, up 1.7m in ten years, so private landlords are an increasingly central part of the housing market as supporting a robust and strong private rented sector becomes more essential.
“The UK housing market has never been a singular thing, instead made up of multiple smaller markets with their own unique conditions and challenges.
“There have been numerous regulatory changes recently and persistent economic uncertainty but this affects every region differently. Going forward, landlords will need continual backing and advice from lenders and the wider industry so they can provide choice, diversity of tenure and quality properties for renters.”
Thinking of buy-to-let investing but unsure where to look? Handily, SevenCapital has revealed what it says are the 10 most attractive places for investors in 2020. It comes as no surprise that the North of England dominates the list.
Top 10 Best Buy-To-Let Locations (alphabetical order)
Average Property Price
Price Growth Since 2014
Average Rental Yield
The property investment firm says “if you’re looking to achieve high rental yields in the UK, typically the further north you go, the higher the yield,” led by Liverpool and Sheffield, where average yields sit above 5.8%. SevenCapital even notes that yields in some parts of these cities can rise to between 7% and 8%.
Slick cities So what makes them brilliant investment destinations? According to SevenCapital…
Regeneration is the story for Liverpool, with £14bn worth of projects in progress, or in the pipeline, creating a place packed with “exciting developments, exceptional career opportunities and rising tenant demand.”
Nottingham’s central location in the UK, terrific infrastructure and good social and shopping scene makes it a hit with professionals and students.
Cardiff is expected to be the fastest-growing British city over the next 20 years, helped by massive regeneration that has brought industries, such as the financial, creative, life science and manufacturing sectors, to life.
Brexit might be hampering the London market right now, but it’s expected to expand again once a deal is reached. Apparently “as one of the major financial destinations in the world, it’s nigh-on impossible for London to experience prolonged declines.”
Oxford is one of the strongest economies in the country, underpinned by its “exceptional employment opportunities and a world-famous education sector.”
One of the fastest-growing population in the UK — expanding at seven times the pace of London — makes Leeds an attractive place for buy-to-let investment.
Property prices in Sheffield are among the lowest in major British cities, allowing investors to ‘lock in’ stronger yields should forecasted growth transpire.
“Chronic supply and demand issues” makes Leicester a top place for buy-to-let investors with plenty of regeneration projects coming to life.
Manchester is “one of the most exciting places to live and work in the UK” and is experiencing the same ripple effect as London has over the past decade, with growth spreading out from the city centre to areas such as Salford, Stockport and Bolton.
An exploding population means Birmingham should need 100,000+ homes over the next 10 years, and for 2020, rampant development ahead of the 2022 Commonwealth Games is expected.
There’s plenty for both prospective and existing landlords to chew over for the year ahead then. But before taking the plunge, investors need to remember that a combination of soaring costs and rising tax liabilities have smashed returns for buy-to-let participants in recent years.
I still believe that those wanting to grab a slice of the property sector would be much better served, therefore, by buying stock in one of the country’s listed housebuilders. Why? A combination of booming dividend yields and some ultra-low earnings multiples at current share prices. It’s why I own shares in Taylor Wimpey and Barratt Developments.
There’s an abundance of other ways to play bricks-and-mortar investment, however. Owners of big logistics centres like Clipper Logistics and Warehouse REIT, firms that are great plays on e-commerce. Alternatively, firms like Empiric Student Property are great ways to play the booming student accommodation market. What’s great about these stocks is that they also offer up dividend yields north of 5%.
Experts reveal the five places where landlords and property investors could make a tidy profit this year.
With Brexit looming the prospects for the UK property market are even trickier to predict than usual in 2019.
But for those looking to invest in buy-to-let next year, experts believe there are a number of areas that could prove profitable whatever happens at Westminster and in Brussels.
According to the latest figures from Nationwide, the East Midlands property market experienced the second-highest growth rate in the country in the year to September.
On top of that, a student population of almost 40,000, many of whom want to live centrally, means there are plenty of potential tenants.
“Property prices in Nottingham are lower than the national average while the rental market is strong, making it a lucrative spot for landlords,” says Rob Bence, co-host of The Property Podcast.
“There are also a lot of planning applications currently being considered for major developments in the city meaning 2019 could be an exciting year for it. It’s currently under the radar for property investors, but I don’t expect that to last.”
Recent research by credit report specialists TotallyMoney showed two Nottingham postcodes were in the top five in the country for buy-to-let yields. NG1 in the city centre was the highest rated with an average yield of 12%. NG7 was in fifth place with almost 9%.
Swansea and Newport in South Wales could both be hotspots in 2019, according to independent property strategist and investor Mike Frisby.
“Swansea is doing well because it’s always been affordable, yields are good there and demand is picking up,” he says.
Meanwhile, the recent scrapping of the toll on the Severn Bridge crossing between England and Wales could have a big effect in Newport.
“Getting rid of that charge will make Bristol commutable from Newport and it should lead to a big boost in demand,” Mike says.
The latest figures back up that view too. A recent Housesimple report showed property prices in Newport have risen by, on average, more than 8% in 2018.
“Cardiff is also doing well as a city but properties there are a bit pricier than in Swansea and Newport,” adds Mike.
Recent figures from Zoopla show that properties in Edinburgh are the fastest selling in the country, taking just 22 days on average to shift.
The city’s housing market is buoyant with opportunities, according to the experts, in a number of areas.
Malcolm Leslie, Director of Residential Agency at Strutt & Parker says: “In terms of buy-to-let the Edinburgh market has been exceptionally strong over the last two years and a lot of that is driven by Airbnb.
“There can be spectacular returns for people investing for that reason. A really good property off the Royal Mile can yield spectacularly. And it’s all year round.”
But it’s not just about being close to the main tourist attractions and renting on a short-term basis.
“There are new developments going on in the east of the city in the old St James’s Centre,” says Malcolm. “That will pull values up in the east end and anywhere accessible to that.
“There is also regeneration going on in Haymarket in the west end. One area there, Dalry, looks like a very good place to invest.”
Liverpool’s property market was on course to reach a value of £1bn in 2018 and the total spent on house sales has more than doubled since 2012.
That’s according to a report, from property data and technology provider Search Acumen, which found the average house price among Liverpool residents has risen by almost £21,000 in five years, around 16%.
Rob Bence says: “Liverpool has seen huge investment over the last few years and there are several major development projects underway that will have a massive impact on the city.
“There’s a strong student population thanks to the city’s four universities and the city centre has been given a new lease of life in recent years and now boasts one of the most impressive food and drink scenes in the region, if not the country. Prices are rising but it’s still possible to grab hold of a bargain and achieve a strong yield.”
Birmingham is the UK’s second biggest city but it has lagged behind its competitors in recent years in terms of property price growth. The latest figures suggest that might be changing, though.
Official figures show Birmingham was the number one destination for people relocating from London last year, with over 7,000 making the switch.
“HS2 is being built to provide high-speed transport links from London and the local economy is strong,” says Mike Frisby.
“Also, a number of head offices have relocated to Birmingham from London and that means there are good job prospects and increased demand for housing.”
It’s not just Birmingham that could do well in that area either.
Mike says: “The whole of the Midlands is looking good because there are an awful lot of distribution warehouses being built and houses springing up nearby. That’s also creating demand for rental properties.
“The affordability there is good too because those areas can be cheaper than elsewhere, particularly in comparison to wages.”
North West and Liverpool are hotspots for property investors and amongst the places where Buy to Let still pays off.
A recent article on thisismoney.co.uk discusses how the North West’s comparatively strong rents, coupled by low house prices, makes it a buy-to-let hotspot right now.
As capital gains forecasts dampen in London and house price growth in the capital becomes worse than anywhere else in the country, investors are looking to other regions for attractive returns.
Totally Money compiles a regular buy-to-let investment report on the top towns and cities for property investors. It states that not only does Liverpool’s high rental demand make the city a dependable market for landlords, but its house prices are relatively cheap when compared to many other areas in the UK. All of this allows for fewer void periods for landlords and good yield returns.
Emma Cox of Shawbrook Bank commented: “Landlords have had a rough ride over the past few years with multiple tax changes. But our research shows that it’s not all doom and gloom for potential investors.”
The above shows Shawbrook’s ranking of Britain’s regions by rental yield, which measures average rents that could potentially be achieved against average house prices. The North West leads the yield ranking with an average yield of 5.4 per cent.
“Lower rental yields in London and affordability constraints for investors has driven interest North, where borrowers are chasing the yield and heading to locations with lower average house prices,” Emma Cox continued.
Buy-to-let mortgage rates continue to fall
Lenders are continuing to slash their buy-to-let mortgage rates in an attempt to lure in new business.
Average rates in the buy-to-let sector have dropped significantly since changes were originally introduced in 2015 – indicating how keen lenders are to get new business onto their books as demand drops.
For example, TSB is currently offering a two-year fixed rate deal at 1.30 per cent with a fee of £1,971 and a maximum loan-to-value of 60 per cent.
Sainsbury’s Bank has a three-year fixed rate deal at 1.49 per cent with a £2,021 fee at 60 per cent loan-to-value.
All the above, coupled with the recent Savillsresidential property forecasts report predicting that the North-South divide will be turned on its head during 2019 to 2023. The biggest price rises are predicted in the North West (21.6 %). So we hope you are just as excited about about investing in Northern locations as we are!
In the latest instalment of his buy-to-let masterclass series, property expert and presenter of The Property Podcast Rob Bence looks at how to find the next property hotspot.
With 2018 drawing to a close, property investors will be looking ahead to the next 12 months and considering their next investment.
But how do you go about choosing a location? For most investors there’ll be mitigating factors that will influence the decision.
Some like to buy properties near to where they live, for example.
Others will be swayed by the type of property they’re after, which will then determine where to look.
For those willing to take a punt on a new and upcoming area, there can be big rewards and the simplest way to identify these areas is by using a technique we call ‘the ripple effect’.
It’s a very simple and, in some ways, obvious tactic.
Spotting the first ripple
When property in one area starts to become more expensive, those people who would have traditionally bought in that area are priced out and have to start looking a little further afield.
They’ll buy a property in a nearby location (so the original spot is still accessible) and this second area will, in turn, start to see price growth as a result.
That means the people who would have bought in this second area are also priced out and have to move a little further out and so on and so on.
So that initial price growth in the first area causes a ripple effect that spreads much wider.
The most obvious example of this is London. Following the economic crash in 2008, the London property market was brought to its knees.
Prices fell significantly.
However, overseas investors who saw London as a safe haven for their money quickly began to snap up prime London properties, pushing would-be buyers further out.
This ripple effect continued until almost all of the South East was impacted.
Indeed, in 2016, eight years after the crash, Luton was named the best investor hotspot in the UK by estate agents Jackson-Stops.
Liverpool an intriguing prospect
A similar thing is happening in Manchester.
A few years ago the city was not seen as the first choice for property, but millions of pounds of private, public and overseas investment has seen Manchester soar and as a result, the surrounding areas in Greater Manchester have also seen significant price growth.
I predict Liverpool will be next.
Overseas investors currently ploughing money into Manchester will start to look for their next location and Liverpool ticks a lot of the boxes they’ll be looking for.
We’re already seeing development there and I know from speaking with developers that there is a lot more to come.
So how can you identify the ripple effect elsewhere?
How to spot the next big thing
Well, the important thing to remember is that all ripples start with a stone being thrown.
That stone could be a number of things: gentrification is a big one.
Once an area becomes a nice place to live, more businesses move into it, more amenities are created and prices start to rise.
East London is a perfect example of this.
Transport links can also start the ripple effect: a new train station, for example, can see prices increase in areas 10 or 20 miles away.
When an area becomes a ‘commuter’ town prices can soar.
It’s a commonly-used tactic, but it’s not for the faint-hearted. To really make the most of the ripple effect you need to be brave.
You need to get in on an up and coming area before anyone else, before you, too, become priced out.
But, if you’re willing to take the plunge, it can reap huge rewards.
Being a resident of Edinburgh, I can assure you that this city is a great choice to buy to let. This is because this thriving city has everything to attract students, tourists, and professionals alike. Following are some reasons why so many people from all over the world are looking to buy to let in Edinburgh:
Booming businesses – With over hundreds of businesses blooming in the city, Edinburgh is Europe’s 4th largest financial center. That’s why many young professionals from various parts of the world flock to this city to flourish their careers, and most actively looking for buying to let.
Student-friendly – Due to a large number of educational universities and institutes in the city, many students are attracted to Edinburgh. With the increasing number of the student population, the demand for suitable accommodation is also on the rise.
Tourism – Edinburgh is a tourist hotspot, and buying property to rent out to holiday makers is a big business here.
Ireland is Europe’s buy-to-let hotspot for the third year running with an average rental return of 7.69%, the annual European Buy-To-Let League Table from WorldFirst, the international payments expert, has found.
Investors in Ireland’s property market have benefited from significant returns due in large part to reasonable property prices in comparison to soaring figures in other Western European countries. A stable euro, continued economic growth and consistent rental demand have also contributed to the country’s performance.
In Ireland while a one-bedroom city centre apartment would now set you back almost £11,000 more than it would have this time last year (+6%), average rents have risen by £127 (+11%) per month.
Jeremy Thomson-Cook, chief economist at WorldFirst said: “Buy-to-let investors looking for the best rental yields in Europe once again need look no further than Ireland, taking the crown for the third time in as many years.
“Part of the reason for Ireland’s buy-to-let success is while average house prices across the country are on the rise; they still sit some way below the country’s 2008 peak.
“What’s more, only Malta, Luxembourg and Sweden have experienced higher population growth than Ireland meaning that rental demand continues to go from strength to strength. Add these two factors together and you have a compelling overall proposition for buy-to-let investors.”
With an average rental yield of 4.67%, the UK sits at the middle of the table in 16th place –a significant improvement on its ranking last year (25th).
Strong rental demand is a significant factor in the UK’s ascent up the table. YourMove’s monthly rental tracker for England and Wales reports that average rents are 2.6% higher than a year ago.
The fall in the value of sterling since the EU referendum has impacted UK buy-to-let investors looking for opportunities abroad. Sterling currently sits approximately 17% lower than the euro in comparison to its position three years ago.
With Brexit uncertainty continuing to cast a shadow over the UK, and London in particular, WorldFirst’s research took a look at how 10 of Europe’s largest cities compare with regard to rental yield.
Dublin (pictured) ranked top of the league table (6.46%), closely followed by Amsterdam (5.33%) and Warsaw (5.15%). London (3.17%) ranked ninth out 10, with only Paris (2.89%) lagging behind.
Cyprus was the biggest climber this year – up from 9th to second place – and Belgium was one of the biggest fallers, down from 6th last year to 12th in 2018. France ranked last place, taking over from Sweden which has held the position for the last two years.
Thomson-Cook added: “While the domestic market has lost its lustre for UK landlords, our research clearly shows that opportunities remain across the European Union more widely. However, though access to this market is still good – it is anyone’s guess as to how much longer that will last.
“For any landlord taking the plunge and looking to invest abroad, while the value of the pound might make the initial purchase price less palatable than it was a few years ago, collecting rent in a different currency could really pay off – particularly if you look further afield than your high street bank for the best exchange rates to bring that income home.”
After a difficult year for buy-to-let investors saw profits in London slump, you could be forgiven for thinking it’s a bad time to expand your property portfolio. But, despite a drop in confidence due to Brexit, and following successive tax increases for buy-to-let purchasers, the property market is still going strong — it’s just that investors are moving away from the capital and looking north instead.
The North of England is currently undergoing something of a miniature economic boom, with digital and tech industries driving demand for high-quality rental accommodation among young professionals. Regional regeneration projects, innovative new housing, and exciting new cultural events are boosting the profile of northern towns and cities, shaking up a property market that was once seen as a stagnant.
If you’re looking to invest in a buy-to-let this year, you could see high rental yields and strong capital growth in the north, so it’s well worth taking a look at real estate that’s not in the pricey south-east. Here, I’ve shared three of the most promising northern towns and cities, including which areas and markets are hotly tipped to be a success with investors in 2018. Just read on to find out more.
It’s an exciting time to invest in the unofficial capital of the north. Property prices in the city look set to rise faster than ever, with research from Home Track published in the Financial Reporter claiming that prices could rise as much as 20-30% by 2022. So, property in Manchester looks to be a safe bet for those looking for strong capital growth on their investment.
The outlook for rental yields also looks promising. Following the recently announced expansion of Media City UK in Salford Quays, and the success of the digital and tech sectors in the city’s Northern Quarter, Manchester’s population of affluent young professionals is on the rise. As a result, there’s currently a high level of demand for top-quality rental accommodation.
Given the city’s 80,000 strong student population, it’s also a solid area of investment for those looking to offer student lets. In suburbs popular with students, such as Fallowfield and Chorlton, it’s not uncommon to see rental yields over 6%, according to Leaders.
With the city set to benefit from a £5.5 billion regeneration scheme that will transform the northern docks area (Liverpool Echo), Liverpool is an increasingly desirable place to live. But, despite how popular the city is with young professionals, rental properties are in short supply, and there’s currently not enough available to meet demand.
The popularity of the city and the scarcity of quality rental accommodation are both very good news for investors. With landlords enjoying rental yields as high as 8%, returns in Liverpool are currently some of the highest in the country, beating southern hotspots such as Southampton, Coventry and even trendy Brighton to take the top spot in a survey by This Is Money. There’s also a buoyant student rentals market, with demand driven by the 50,000 students living in the city: the areas surrounding Liverpool Hope and John Moores University are especially lucrative for house and flat shares.
If you’re looking for a low-cost investment with solid rental yields, look no further than Gateshead. Property prices are rising slowly but steadily meaning that, while it’s not one for quick capital growth, it’s still a dependable bet for investors looking for property that will retain its value. The expanding north east job market is attracting a steady supply of professionals to the area, while upcoming regional events, such as the Great Exhibition of the North later this year, look set to cement Gateshead’s profile as an investment hotspot even further.
Average property prices in the north-east town are still 46% under the national average (Telegraph), making it an affordable investment for buy-to-let investors with smaller budgets. In terms of rental yield, investors can expect healthy returns owing to overall low property prices: a one-bed flat in central Gateshead could see an average yield of 7.6%, according to Property Data. While neighbouring Newcastle boasts two large universities, most students are looking for something closer to their place of study, so the focus should definitely be on professionals in smaller homes over large student house shares.
If you’re looking to expand your property portfolio this year, you may want to step away from London and south-east England and take a look at the housing stock in areas like Liverpool, Manchester, and Gateshead. With affordable house prices that are rising steadily, and great potential rental yields, it could be your next big success.
Liverpool and Nottingham are the UK’s best performing locations for landlords with average net rental yields of 6.2 per cent, the latest analysis of buy-to-let hotspots by Private Finance shows.
Overall rental yields in the top 10 locations in the country have increased by an average of 0.9 per cent since May 2017 with the biggest increase of 2.2 per cent recorded in Southampton where rents are rising faster than house prices.
Nottingham is now joint top after moving up from second position due to a £121 increase in average monthly rents.
Cardiff, with a net rental yield of 6 per cent, comes third, followed by Southampton and Greater Manchester both at 5.9 per cent.
Shaun Church, director of Private Finance, said: “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 10 buy-to-let hotspots, larger cities and university towns tend to offer the greatest opportunity for investors as they offer the highest rental demand.
“Although the buy to let sector is facing many challenges, one area where landlords have benefited is falling mortgage rates.
“However, seeking independent advice is becoming increasingly important for landlords to find and be accepted for the best deals.
“With house prices on the rise, too large a loan can negate any savings made from low rates, so landlords need to consider all aspects of their mortgage.”
There was a slight increase in average mortgage rates towards the end of 2017 as November brought the first interest rate rise in 10 years, up to 0.5 per cent.
However, Bank of England data shows the average two year 75 per cent loan to value buy-to-let fixed rate is at its lowest point at 2.47 per cent since tracking began in January 2012 and has fallen by 2.62 per cent since May 2017.
As a result, many landlords across the UK will have seen their annual mortgage costs fall.
Within the top 10 hotspots, Brighton and Hove has seen the biggest reduction in mortgage costs. Despite a 2.1 per cent increase in house prices in the area in the past eight months, meaning the size of a 75 per cent loan has increased, as a result of falling mortgage rates a landlord would now pay £6,681 in interest annually compared to £6,993 last May, a saving of £312.