Towns and cities in the north of England have come out on top of a league of the best places to invest in buy-to-lets. A study ranked 100 major towns and cities in Britain, taking into account the average income, property price and rent. This exposed a clear north-south divide, with every one of the top 10 destinations being in the north, and the 10 least efficient places for buy-to-lets being mainly in the south.
Top spot in the study conducted by property investment marketplace, Property Partner, was Stoke-on-Trent, where average property prices are £117,586. This means a 25% deposit of £29,397 deposit would be needed for a mortgage to cover the other 75%. The average rent in Stoke is £6,672 a year giving an annual rental yield of 5.67%. Second place was Oldham, with Liverpool coming third. The other seven towns in the top 10 are Gateshead, Leeds, Middlesbrough, Newcastle, Rochdale, Rotherham and Stockton-on-Tees. The bottom 10 were Bournemouth, Brighton, Cambridge, Central London, Chelmsford, Oxford, Poole, Sevenoaks, St Albans and Winchester.
However, other research by Lendinvest, which looks at capital gains, rental yields, rental price growth and transaction volume growth, suggests some commuter towns in south-east England are the place to invest, because of their combination of rising rents and strong capital gains. The top 10 performers are Luton, Canterbury, Colchester, Dartford, Manchester, Peterborough, Rochester, Romford, Stevenage and Southend-on-Sea. Using these figures, it shows there are still areas of the south-east, including towns suitable for commuting to London, which are worth investing in. For example, Romford in East London has rental yields of 4.81% and capital gains of 14.42%. Luton in Bedfordshire is top of the list, with a rental yield of 4.54% and capital gains of 12.83%. Dartford in Kent also has good yields of 4.37%. These three are all popular commuter towns within easy reach of London by train, so they are going to remain good growth areas. While central London performs relatively poorly when comparing property prices to rents, commuter towns are worth investigating.
LendInvest CEO and co-founder, Christian Faes, said there had not been a great shake-up in the top 10 buy-to-let postcodes overall, signalling the durability and resilience of the UK property market.
Buy-to-lets remain an attractive investment, despite changes to the tax system, such as higher stamp duty charges, capital gains tax, withdrawal of the 10% wear and tear allowance for furnished properties, and the restrictions on mortgage interest relief. More people are looking to invest in property because of the volatility of the stock market and poor returns on traditional savings accounts and bonds. Obviously, getting the location right is the key to a successful investment. Using research conducted by companies such as LendInvest and Property Partner will help show the top performers and expected yields. However, even these seem to vary depending on which data they used to reach their conclusions. Clearly, local knowledge is still the key to finding desirable properties in the right area. Investors should either stick to areas they know personally or appoint an agent to do the research for them.