Working out who your target tenant is and what return you’re looking for will influence your decision on where to buy, amongst other things. Ideally though, landlords should look to buy in an up-and-coming residential area where prices are low, with the potential to climb higher, and rents are on the rise as more people move in. This will result in a high NET yield and is the perfect formula for buy to let.
With this in mind, it’s no surprise to see a raft of headlines promising to reveal where the UK’s highest yielding areas are. Over the past 12 months there has been a clear divide growing between the North and South, helping to tip the scale in the UK where the economy has traditionally been stronger in the South thanks to its proximity to the capital. New data from Your Move backs up this theory, concluding that investors in Northern regions enjoy the highest percentage returns, with average yields ‘much higher’ than in southern areas.
Buy to let landlords in the North East enjoyed an annual yield of 5%, with the average rent sitting at £542 in October 2018, up 0.34% on the previous month. The yield table shows that just behind the North East is the North West, with an average yield of 4.8%. These are both notably higher than the southern regions, with Your Move revealing rental yields of 3.15% in London, 3.31% in the South West and 3.32% in the South East.
Martyn Alderton, National Lettings Director at Your Move, said: “Properties in the North appear to offer high percentage returns to property investors and, as a result, they are attracting interest even more.
This strong appetite to buy has been accompanied by a rise in demand for rental properties, since the North is attracting many young professionals and families with its good transport links and job prospects. As the London market continues to gently slow down, other regions are coming to the fore and proving attractive to investors.”
However, it is also important to take into account that the South West walked away as the winner when it comes to rent rises, with asking rents in the South West region growing quicker than anywhere else in the UK over the last year. Rents rose by 4.3% in the year to November 2018 (1.8% higher than the national average rise), amounting to a healthy average of £701. This indicates that although the north is currently sitting at the top of the list for investors, the south should not be entirely ruled out as tenant demand continues to fuel rental price growth.
What is certain, however, is that key cities in the UK’s booming north are primed for investment and should be considered by landlords, particularly those who many have a predominantly southern based property portfolio.
Are you thinking of expanding your buy to let portfolio in 2019 and want to learn more about buy to let in the north? Contact Knight Knox today to find out how we can help you!