Northern buy-to-let is the UK’s top performer

Research released this week by mortgage consultancy BM Solutions, the buy-to-let brand of Lloyds Banking Group, has confirmed that buy-to-let properties in the North of England are performing the most strongly across the whole UK based on figures from the second half of 2016.

Northern buy-to-let is the UK’s top performer

Investment performance across the North, and especially throughout Manchester, Liverpool, Leeds and other Northern Powerhouse regions, has been strong since the end of last year and many will be unsurprised by the confirmation offered in this new report. The figures also suggest that London’s buy-to-let troubles are far from over with the capital ranking last for rental yield returns over the same period.

The Northern Powerhouse, the Government’s plan to rebalance the economy away from London, has hit new heights since the turn of the year as infrastructure projects such as those in Salford, Stockport, Bolton and across the Liverpool city region head towards completion. Jobs and inward migration have all increased and it has also been announced that unemployment has fallen to record lows across the UK.

Not just in city regions, though; the areas surrounding the North’s flagship cities have become increasingly popular with investors and landlords as attention turns to outlying areas such as Warrington in between Manchester and Liverpool and the Headingley area of Leeds. Rental yields in such towns are tracking to the national average right now but many are expecting them to grow significantly in the near future.

The national average rental yield for landlords was a very healthy 5.3% despite slowdowns in some areas of the country. With annual consumer price inflation at just 1%, landlords earned more than 4% returns in real terms and the average rental income per month reached £766.

At £1,591 per month, rents remained highest in Greater London, 45% more expensive than the south east (£1,095), which is the next most expensive region, and 108% more the UK average. With these rates sitting so much higher than the national average and soaring faster than wage increases and affordability levels there is a real suspicion that London prices will soon reach unsustainable levels.

London, as evidence of this, saw the lowest rental yields in the UK (4.4%), followed by the south east and the south west (both 4.9%). In the North, however, yields were as high as 7%, followed by Northern Ireland (both 6.5%) and the North West (6.4%). The difference is stark and could indicate a growing trend between the regions.

Quoted in the Financial Times, Phil Rickards, head of BM Solutions, said: “Rental yields remain strong, still offering investors high real returns.”

“Typically buy-to-let investors in Northern areas tend to benefit from lower property values providing higher yields, whereas Southern regions have the lowest yields given the higher housing costs.”

Evidence is now starting to build that a buy-to-let revolution could be brewing across the North where prices, cost of living and yields have conspired to make cities like Manchester, Leeds and Liverpool the UK’s best investment hotspots.

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