Buy-to-let yields remain strong – if you know where to look (1/2/2018)

linkuk_admin   February 1, 2018   Comments Off on Buy-to-let yields remain strong – if you know where to look (1/2/2018)

January 4, 2018

For landlords and investors, a property’s potential return on investment is key to making the right purchase choice, so finding the best location to invest your money is vital.

There are many factors involved in making a buy-to-let purchase, and rental yield is just one of them. Location may depend on each individual investor’s preference in terms of ease of property management, as well as personal ties to an area. It’s also vital to look closely at each location as a place to live, where tenants will have enough local amenities, as well as considering the level of demand in the area.

But rental yield is still of the utmost importance to long-term investors, and Totally Money has put together a report of all the postcodes across the UK – excluding those with less than 30 properties available for sale and 30 for rent at the time of the report – to reveal average rental yields available in each area.

Where are the best places to invest?

Liverpool postcodes dominate the top 25 areas of the buy-to-let yield list, with L7 – which covers the city centre, Edge Hill, Fairfield and Kensington – taking the top position with a huge average yield of 12.63%. This is based on a median rental value of £1,224, and a median asking price of £116,259. At the time the report was compiled, there were 177 properties available for rent, and 79 properties for sale.

House prices in Liverpool are lower than the UK average, with Rightmove estimates putting the average sold price in the region at £105,702 over the past year, while rental demand is high, as the city is home to three universities as well as a growing number of young professionals.

Other top performing Liverpool postcodes are L6 in second place with a 10.57% average yield, L15 in third place with a 10.29% yield, L1 in 10th place with an 8.61% yield, and L3 in 11th place with an 8.47% yield.

Next on the list are Plymouth (PL4) – one of the few places outside the north of England to get a top spot – with 10.15% average yield, Cleveland (TS1) with 10.06%, Preston (PR1) with 10.04%, Dudley (DY5) with 9.57% and Nottingham(NG1) with 8.91%.

Manchester also makes a couple of appearances in the top 25, with M6 – which encompasses increasingly popular Salford – in 14th position with an average yield of 8.25%. The rental market in Manchester has been growing in strength in recent years, and its four universities provide ample opportunities for landlords who are willing to invest in student accommodation.

North-south divide

The north of England in general has outperformed the south in terms of buy-to-let yield, especially in areas such as London and the home counties.

Eight London postcodes appear in the bottom 25 list, although part of Bournemouth – BH13 covering Canford Cliffs and Sandbanks – is the worst performer in the country with an average rental yield of just 1.41%. The median asking price for properties here is a massive £1,456,539, while rents are £1,714 on average.

Second from the bottom, London’s N2 area of Finchley brings in yields of only 1.48% on average, while N6 (Highgate) takes fourth place with 1.76%, and NW11 (Golders Green) is in eighth place with 1.93%. While the capital can command some of the highest rents in the country, average yields are dampened by the fact that property prices in some areas are almost 13 times the national average.

Joe Gardiner, head of brand and communications at Totally Money, said: “Realising a decent return on a buy-to-let rental property is becoming increasingly difficult.Property prices continue to rise steadily, albeit more slowly, and rule changes have made lenders more cautious.

“Prospective landlords need to go into property investment armed with the facts: they need to be on top of their credit report, compare the market for the best buy-to-let mortgage rates and focus on property investment in areas that can give them the highest yield.”