Northern England Represents the Best-Value Buy-to-Let Opportunity
According to Hamptons Estate Agency, buy-to-let investors in the UK are moving away from London in search of property investment opportunities in northern England.
As reported in the Telegraph, two-thirds of the capital’s landlords bought property outside of London this year. 10 years ago, only one-third of London landlords bought property in other areas.
The North of England has attracted 24% of all property purchases by London-based landlords in 2023, up from 1% 10 years ago.
Read on to see how this affects investment properties in 2023 and beyond.
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Why Are Landlords Heading North for Buy-to-Let?
One of the main reasons landlords choose the North over the South is the higher taxes and slow house price growth in the capital, affecting potential capital growth for buy-to-let investors.
In contrast, the North offers better-value property with higher rental yields, meaning landlords initially pay less for the property and make a higher net profit from their tenants.
According to Hamptons’ head of research, Aneisha Beveridge.
“If you’re going to use a mortgage to fund a buy-to-let, you really need to buy one with a much higher yield.
“Naturally, that has pushed people further North where those returns are more likely to be available and achievable.”
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Typical Rental Yields in the North Compared to London
Let’s say you wanted to purchase a property in the North West.
The average property price in Liverpool is £180,268. In Manchester, the average property price is £291,546. Both figures come from the Land Registry UK House Price Index.
Home.co.uk puts Manchester’s average rent at £1,716 PCM and Liverpool’s at £1,046 PCM.
This gives both cities an average yield of around 7%.
Elsewhere in the North, cities like Sunderland, Newcastle, Burnley and Middlesbrough also command strong yields.
In contrast, in their September Rental Market Report, Zoopla puts the average rental yield in London at just 4.7%.
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What Happened to London House Prices?
Thanks to rising interest rates affecting buyer demand and, in turn, mortgage rates, London house prices have seen reduced growth in the buy-to-let market since 2015.
However, property prices in the North have been rising steadily over the last eight years despite slowing since interest rates rose after the last 18 months.
With rental demand increasing, rent prices are going up, resulting in substantial yields on good-value northern investments. In Liverpool, City Centre apartment rents have risen by 12%. Meanwhile, the Homelet Rental Index puts rental growth in the North West at 10.43%.
Aneisha Beveridge told the Telegraph: “We saw London house prices rising quickly up until 2015, and then they have gone into this stagnation period.
“In the North, we’ve seen prices rising more. So, investors there have had the best of both worlds over the last seven to eight years.”
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