Buy-to-let hotspots: most profitable areas

Tax changes and rising mortgage rates are putting the screws on making buy-to-let seem less appealing, but a new survey suggests there is still plenty of money to be made – if you invest in the right places.
The past couple of years have been full of bad news for buy-to-let landlords. Increasing buy-to-let mortgage interest rates combined with a change to how much mortgage interest you can write off against tax has dealt a blow.
On top of that, the additional rate of Stamp Duty has also hit landlords.
But, a new survey has revealed there are still plenty of places in the UK where you can still get a decent yield on a buy-to-let investment.
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Financial site Totally Money looked at 500,000 properties across England, Scotland and Wales and found that while landlords in London may be struggling to make a decent return in Liverpool yields of almost 13% are still possible.
“Realising a decent return on buy-to-let rental property is becoming increasingly difficult. Prospective landlords need to go into property investment armed with the facts,” says Joe Gardiner, head of brand and communications at Totally Money.
“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.”
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Top 25 buy-to-let property hotspots
The research found that students are providing many of the buy-to-let hotspots around the country with university towns such as Newcastle, Manchester, Nottingham, Sheffield, Glasgow, Cardiff and Plymouth, as well as Liverpool, all offering the best returns with average annual yields, before costs, of over 7%.
Lower house prices outside of London and the South East, combined with student demand for rental accommodation mean that all these cities have housing stock that provides a decent investment yield for landlords.
|
Town |
Postcode |
Properties for Rent |
Median Rental Value |
Properties for Sale |
Median Asking Price |
Yield |
1. |
Liverpool |
L7 |
177 |
£1,224 |
79 |
£116,259 |
12.63% |
2. |
Liverpool |
L6 |
217 |
£959 |
133 |
£108,898 |
10.57% |
3. |
Liverpool |
L15 |
227 |
£1,214 |
241 |
£141,566 |
10.29% |
4. |
Plymouth |
PL4 |
334 |
1,315 |
271 |
£155,437 |
10.15% |
5. |
Cleveland |
TS1 |
146 |
£541 |
81 |
£64,507 |
10.06% |
6. |
Preston |
PR1 |
431 |
£1,027 |
586 |
£122,695 |
10.04% |
7. |
Dudley |
DY5 |
53 |
£1,145 |
96 |
£143,527 |
9.57% |
8. |
Nottingham |
NG1 |
79 |
£1,258 |
125 |
£169,521 |
8.91% |
9. |
Bradford |
BD1 |
226 |
£478 |
82 |
£64,903 |
8.84% |
10. |
Kirkcaldy |
KY1 |
105 |
£892 |
368 |
£124,254 |
8.61% |
11. |
Liverpool |
L3 |
167 |
£1,035 |
716 |
£146,712 |
8.47% |
12. |
Newcastle |
NE6 |
425 |
£826 |
229 |
£117,863 |
8.41% |
13. |
Huddersfield |
HD1 |
127 |
£724 |
151 |
£104,394 |
8.32% |
14. |
Manchester |
M6 |
130 |
£1,035 |
94 |
£150,550 |
8.25% |
15. |
Leeds |
LS6 |
1,128 |
£1,482 |
43 |
£217,154 |
8.19% |
16. |
Sheffield |
S2 |
238 |
£702 |
122 |
£104,376 |
8.07% |
17. |
Newcastle |
NE1 |
308 |
£1,152 |
115 |
£172,225 |
8.02% |
18. |
Liverpool |
L5 |
45 |
£574 |
145 |
£86,245 |
7.99% |
19. |
Manchester |
M14 |
279 |
£1,335 |
78 |
£200,852 |
7.98% |
20. |
Sunderland |
SR1 |
107 |
£539 |
32 |
£82,125 |
7.87% |
21. |
Liverpool |
L8 |
169 |
£841 |
168 |
£135,323 |
7.45% |
22. |
Cardiff |
CF37 |
128 |
£844 |
209 |
£136,267 |
7.43% |
23. |
Glasgow |
G3 |
37 |
£1,178 |
30 |
£192,032 |
7.36% |
24. |
Aberdeen |
AB11 |
198 |
£762 |
31 |
£125,125 |
7.30% |
25. |
Newcastle |
NE2 |
555 |
£1,250 |
118 |
£205,479 |
7.30% |
And where to avoid
At the other end of the scale, soaring house prices mean yields in London and the South East are the lowest in the country with landlords in parts of London managing an average annual yield of under 2%.
Here, the high cost of property means it can take landlords years to cover their costs and start making a profit.
These are the postcodes that offered the lowest yields of the 2,700 postal areas Totally Money surveyed.
|
Town |
Postcode |
Properties for Rent |
Median Rental Value |
Properties for Sale |
Median Asking Price |
Yield |
1. |
Bournemouth |
BH13 |
72 |
£1,714 |
202 |
£1,456,539 |
1.41% |
2. |
London |
N2 |
230 |
£3,702 |
186 |
£2,994,317 |
1.48% |
3. |
Birmingham |
B70 |
52 |
£633 |
82 |
£450,639 |
1.68% |
4. |
London |
N6 |
172 |
£2,899 |
197 |
£1,971,822 |
1.76% |
5. |
Bournemouth |
BH14 |
81 |
£1,293 |
229 |
£831,035 |
1.86% |
6. |
Slough |
SL1 |
381 |
£1,071 |
499 |
£674,362 |
1.90% |
7. |
Exeter |
EX8 |
38 |
£717 |
139 |
£448,774 |
1.91% |
8. |
London |
NW11 |
498 |
£2,456 |
282 |
£1,523,534 |
1.93% |
9. |
Birmingham |
B15 |
83 |
£963 |
75 |
£587,683 |
1.96% |
10. |
Bromley |
BR7 |
31 |
£1,414 |
132 |
£854,160 |
1.98% |
11. |
Leeds |
LS18 |
42 |
£512 |
45 |
£302,086 |
2.03% |
12. |
Gloucester |
GL53 |
40 |
£877 |
55 |
£516,842 |
2.03% |
13. |
Harrow |
HA6 |
129 |
£1,736 |
190 |
£987,810 |
2.10% |
14. |
Kingston-upon-Thames |
KT20 |
32 |
£1,702 |
189 |
£967,397 |
2.11% |
15. |
Slough |
SL8 |
35 |
£1,425 |
52 |
£778,236 |
2.19% |
16. |
Enfield |
EN6 |
75 |
£1,304 |
320 |
£710,537 |
2.20% |
17. |
Hemel Hempstead |
HP23 |
35 |
£1,092 |
138 |
£593,300 |
2.20% |
18. |
Southampton |
SO41 |
47 |
£1,286 |
350 |
£695,635 |
2.21% |
19. |
Huddersfield |
HD9 |
35 |
£679 |
222 |
£364,310 |
2.23% |
20. |
London |
NW5 |
184 |
£2,088 |
179 |
£1,111,065 |
2.25% |
21. |
London |
N10 |
200 |
£1,747 |
222 |
£923,278 |
2.27% |
22. |
Brighton |
BN3 |
167 |
£1,665 |
313 |
£876,105 |
2.28% |
23. |
London |
N20 |
90 |
£2,442 |
185 |
£1,284,812 |
2.28% |
24. |
London |
SW8 |
576 |
£2,685 |
1,185 |
£1,403,592 |
2.29% |
25 |
London |
NW7 |
171 |
£1,948 |
309 |
£1,010,503 |
2.31% |
Have you been put off buy-to-let by falling yields, or have you bought student property in a far away city so you can make a decent return? Tell us in the comments below.
Most Recent
Comments
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Completely agree with NickNuts on the moral implications of buy-to-let. There are so many young couples desperate to buy their first drum & bass the size of a postage stamp, and the prices are being dragged up and up and up by multiple property owners. (I'm not getting into bitcoins though.)
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I think BTL is immoral. It's taking advantage of a sick economy where low interest rates have produced fake high house prices. If you max out the borrowing to get into BTL, I don't see any money being made. Home ownership was on the rise, Labour wreck the economy and now ownership has fallen appreciably. This country hasn't been managed properly since WW2. Now what is that word I am searching for, oh yes, Bitcoins.
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If you are a higher rate tax payer then the appeal of Buy to Let has definitely been eroded as the benefit of offsetting your interest rate charge on the mortgage will be gone completely in a few years. Given the yields quoted above I think it's better and a lot less hassle to get the same (or even more) in a spread of decent fund via a stocks and shares ISA. Check out the Baillie Gifford funds which have reasonable charges. Granted, the capital gain may (or may not) be as exciting but the hassle of being a landlord is removed. I am talking from experience. I have now sold my rental property and putting the money into stocks and shares ISA.
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18 December 2017