A new study has been released which analyses the buy to let market, revealing which areas provide the best investment opportunities to investors. This research is likely to be of particular interest to buy to let landlords that adopt high yielding investment strategies.
The research was conducted by Shawbrook Bank, which has discovered that Scotland and the North West were among the best current UK hotspots for high investment yields. In particular, the city of Manchester, alongside the North West region of the UK, have been named the new top investment spots for property, due to high rental yields, at an average rate of 5.4 per cent. This is partly due to low property prices in the area, which create easily achievable higher rental yields. The average house price in the UK is presently £228,000, but house prices in the North West region are 43 per cent lower, at only £159,000. The city is also attracting students and workers from across the country, due to better job prospects and high quality education.
Scotland was placed second in the rankings, with the country offering attractive rental yields for investors at an average rate of 5.3 per cent, only 0.1 per cent behind the North West. Yorkshire and the Humber region followed in third place, with impressive rental yields of 4.9 per cent.
Shawbrook Bank’s Sales Director for Commercial Mortgages, Emma Cox, has stated that landlords have experienced a difficult time over the last few years, due to multiple changes to tax, but the research has demonstrated that it is not a completely disastrous market for potential landlords in 2018. Affordability constraints and low rental yields offered by London have driven investor interest North, as borrowers chase higher yields and invest in locations where lower average house prices are offered.
While analysing residential property prices across the UK, research from Shawbrook Bank has predicted that annual property price inflation will be more subdued in the five years leading up to 2023. The study also forecast that average annual house prices will see annual growth of 4.5 per cent, compared with an average annual growth of 7 per cent in the years between 2015 and 2016.
Years of low wage growth, stretched affordability ratios and the further interest rate rises expected have all had an effect on the house price outlook for the UK over the next few years. Shawbrook Bank has predicted that price growth within London will remain trailing behind the other regions of the UK over the next two years, which is partly because of the lower number of overseas investors choosing to invest in the city.
According to new data provided from Aston Chase, the estate agent, the number of high-end property purchases from overseas in the city’s most costly postcodes has dropped by around 44 per cent in 2016, to only 35 per cent in 2017.
Ms Cox added that there are still intriguing opportunities ahead for shrewd investors, with good investment opportunities available. However, if landlords invest in regions which are far from their home location, they could risk falling foul of local knowledge. It is crucial that investors thoroughly research the local demand and supply of rental housing before investing.
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