Why the North is ideal for buy to let
The North vs South debate has been longstanding in England for a number of reasons. The vast difference between the two regions stretches across a wide range of factors - everything from landmarks, bars and restaurants and even general hospitality. One feature that many believe to ring true is that when it comes to property, the south wins over the north due to its astronomically high prices both for renters and buyers.
However, over the years, the north has outgrown its “grim” stereotype of small towns with drab homes and become a hub of eclectic innovation and change. Large cities like Manchester and Liverpool now reign supreme as high net worth areas that attract all walks of life and are home to international businesses and buildings of great architecture. With this, the property market sees not only growing house prices but an increase in rental demand, affordable yet luxury developments under construction and a significant increase in the number of buy to let investors. We take a look at the three standout factors that make the north the best place to invest for buy to let.
It’s common for some first time investors to want to purchase a buy to let property close to where they reside themselves. While it’s natural for us to want to be able to check up on the property as and when we feel like it, there is no real need for this to be the case if you’re looking for a hands-off investment. While capital growth does play a part in buy to let, those seeking a regular income will want to focus on the yield (or return on cash invested if purchasing with a mortgage), not necessarily concentrating on purchasing somewhere close to home.
In a report issued by HSBC earlier in the year, Manchester was named the number one place in the country for buy to let, with all the top three buy to let locations situated in the north. For Manchester, yields were reported to average at 7.98% across the city. To give this some perspective, some popular districts of London, such as Kensington and Chelsea, failed to reach even 3% rental yield, so for those looking for great returns, it’s wise to look further north.
Major northern cities like Manchester and Liverpool never fail to attract an array of people. From young professionals, students, couples and families, city centres remain a prime rental location. They have everything from major universities, attractions, bars restaurants and transport links which makes for a very desirable area to live, with everything you could need on your doorstep.
It is in the north of the country where rent prices are able to stay affordable, so tenants can get much more for their money. Rents sit at an average of around £700 a month and for this tenants can look to get a luxury, two bedroom property in a purpose built development right in the city. As well as this, investors still get great returns on their investment as well as benefiting from capital growth. Compare this with London, where average rental prices are much higher, it is common for tenants to have to share facilities with strangers and have much smaller apartment space per square foot. Plus, landlords see every little returns in comparison so it is no wonder tenants and landlords are drawn to the north as a result.
Despite the small yields and lower quality of homes, the high price of London property leads some novice landlords to believe it is a better investment, as it’s more likely their assets will increase dramatically in value. However, although prices are known to grow at a phenomenal rate, this doesn’t always allow for a good investment.
We are starting to now see a gradual slowdown of property prices in the south, particularly London. This can be put down to house prices growing at an unsustainable rate that simply could not continue. As a result, buyers, investors and tenants are all gradually moving away as the property prices are simply out of reach and unaffordable. Compare this to the north, and house prices have seen a much healthier growth rate, and this steady increase leads to much better long term gains.
For buy to let especially, the north is the best place to be. As property prices in the south reach ridiculous heights, investment is no longer an affordable option and where capital growth may appear at times, rental yields certainly don’t. Cities such as Manchester, Liverpool, Sheffield and Leeds all outperform the south when it comes to yield, and capital growth potential allows for an even smarter investment.
If you’ve been considering a buy to let purchase in the north, contact Sequre today. We source properties all over the UK on behalf of our investors. To find out more, call 0800 011 2277.