Buy to lets have had a hard time in recent budgets and financial statements from the treasury, with the recent Autumn Statement from the Chancellor of the Exchequer imposing further financial constraints on buy to let property purchases. These moves can be seen as a way of trying to discourage people from buying a second property to let out, however based on the Treasury’s own numbers and other estimates these tax hikes may have minimal effect in the numbers buying lettable properties.
In London property prices have risen exponentially over the past 5 years and in a number of areas these rises have four outstripped the rise in rental prices. When this happens the profitability of a property decreases causing people to avoid the market. There are still some parts of the United Kingdom that potential landlords can take advantage of and see a substantial rental yield on their initial investment. These areas are the prime locations for the letting market – there is a growing population, initial property prices are low and rental prices are rising faster than property prices. This creates a booming rental market and a number of opportunities for investors in the housing sector.
In any measure of the top places to purchase a buy-to-let property you will notice that the majority of locations are to the north of London, predominantly due to the lower initial cost. Below we look at three of the top towns and cities in England where you can continue to find a buy to let gem, giving you information about the average house prices and the yield you can expect to receive.
Most people will know Manchester for their top-class sporting prowess, with Manchester United and Manchester City both calling the city home. This should come as no surprise however, Manchester is the third largest city in the United Kingdom and is continuing to grow in population. The demand for rental properties is already sky high and it is only going to increase with the development of High Speed 2 (HS2) connecting the city to London via a high speed rail line. HS2 plans to connect Manchester and London with a journey time of just over 1 hour, making Manchester a well-connected hub for a range of people. Manchester also has the largest student population in the country – all of whom will need some sort of accommodation during their stay.
In terms of buy to let the average house price in Manchester is £108,870 with an average annual rent of £8,628. This represents a rental yield of just under 8% which is amongst the highest in the country. With a growing rental market due to the ever expanding population, Manchester is becoming one of the most popular places to purchase a buy to let property.
A matter of miles from Manchester you arrive at the cultural city of Liverpool. Once famous for its rundown suburbs and city centre, Liverpool has had a lot of development to transform a once tired city into the vibrant and exciting place it is today. With new shopping centres, such as Liverpool One, Albert Docks, growth of art venues and an influx of new luxury apartments, Liverpool city centre is one of best in the UK.
A buy to let in Liverpool can be a very profitable investment, predominantly down to the low house prices and high demand. On average a house costs £90,426 and a landlord can expect an average annual rental of approximately £8000, representing a rental yield of 6.5%. The large population of students, recent graduates and young professionals make Liverpool a top destination for those wanting to dip their toes into rentals.
The third of our top places to purchase a buy-to-let is also in the North of England, in the West Yorkshire city of Leeds. House prices in Leeds are yet to surpass their 2007 peaks, whereas the bulk of the UK has now soared past these and reached new record highs. Currently house prices in Leeds are approximately 15% below their 2007 levels and you can expect an average house price of £180,579 – so a much higher initial cost than Liverpool or Manchester, although still well below the average for England and Wales. From this initial investment you can generally expect a rental yield of 6%, although there are new builds that offer higher amounts.
Leeds is another northern city with a thriving university community and a large number of students seeking accommodation. Like Manchester and Liverpool, Leeds is another example of how buy to let is not a dying industry – despite added costs imposed by the government. Outside of London and the South East there are vast areas where you can still see a positive return on investment and become a landlord.
This article was provided by Mike James, an independent writer and marketer representing a selection of UK based property and investment companies – including Prime Centrum, who were consulted with regard to the information covered in this post.