The North West of England and Scotland are the top rental hotspots for landlords due to higher yields, according to a new analysis of the buy to let housing market.
The North West region, with Manchester in particular, have then highest yields at 5.4%, followed by Scotland at 5.3% and Yorkshire and the Humber at 4.9%, the data from the buy to let report from Shawbrook Bank and the Centre for Economics and Business Research (CEBR) shows.
It explains that lower property prices mean it is easier to achieve better rental yields and the Manchester is attracting students and employees from all around the country while the average UK house price is currently £228,000, some 43% higher than the average house price in the North West at £159,000.
Overall, the report suggests that despite tax changes making it harder to make money on buy to let, there are still pockets of the market where investors can make it work.
Looking at house prices, the research also predicts that annual property price growth is set to be more subdued in the five years up to 2023 than over the last few years at around 4.5% compared with 7% from 2014 to 2016.
‘Stretched affordability ratios, years of weak wage growth and the prospect of further interest rate rises all weigh in on the outlook for house prices in the UK for the next few years,’ it adds.
It also points out that house price growth has slowed in London with Brexit and the resulting uncertainty regarding the future of the financial services sector in the City of London looming over activity in the prime end of the market as have higher stamp duty rates.
The report expects price growth in London to continue to trail behind the rest of the country for the next two years, with new figures from estate agent Aston Chase already showing the percentage of high end purchases from overseas in London’s most expensive postcodes dropping from 44% in 2016 to 35% last year.
With landlord investment in London slowing, this improves the attractiveness of other regions for buy to let investors, it explains.
‘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 in 2018. 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,’ said Emma Cox, ?sales director for commercial mortgages.
‘There are still interesting times ahead for savvy investors and good investment opportunities remain. However, when landlords invest far away from their home turf, they can run the risk of falling foul to local knowledge. Smarter local investors may be seeing an opportunity to divest themselves of their less desirable housing stock, so it’s important for buyers to do their research to make sure they understand the local supply and demand before investing,’ she added.