It comes as no surprise that a North-South divide is emerging in the buy-to-let market, with all of the top 10 hotpots found in the North of England.
Rising property prices in London and the South East have made investing in this region increasingly unprofitable for landlords, a study* has claimed. A total of 100 British towns and cities that were investigated and the top ten best buy-to-let locations were all found to be in the North, while the bottom ten were in the South (*Source: Property Partner, June 2017).
Stoke-on-Trent is the UK’s leading buy-to-let hotspot, with the rest of the top ten featuring Leeds, Middlesbrough, Newcastle, Stockton-on-Tees, Gateshead, Rotherham and Rochdale. An investor would need a deposit of £29,397 to secure the average buy-to-let purchase in Stoke-on-Trent on a loan-to-value of 75%, and the average property price in the town is £117,586.
According to the research, prospective landlords in Poole face the most challenging investment in buy-to-let, where annual rental yield was 1.94%, followed by Central London and then Sevenoaks.
It begs the question, why would anyone look South to invest in BTL property? What’s surprising is that Oldham is included in the top 10, while Manchester isn’t. An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation. Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper.
House prices in London are about five times what they are in Manchester for example, but salaries are only 30% higher. Manchester is a very affordable place to live and demand for property is soaring in the City, thanks to the expansion of the MetroLink tram system, the trendy Northern Quarter and the BBC Media City. It has vibrant restaurants, bars, clubs plus a great music scene, galleries and museums. Manchester is also home to nearly 100,000 students, making it one of the largest student cities in Europe
Manchester is actually a very affordable place to live and many students chose to carry on living here after they graduate, as well as graduates from other areas moving to Manchester. There’s a very important young professional scene in Manchester. The cost of wages relative to property costs is a very important factor in attracting these people. House prices in London are about five times what they are in Manchester, but salaries are only 30% higher.
Manchester is a great place for investors. I have built a successful, mid-sized portfolio of buy-to-let properties in South Manchester. Over the last 12 months I have enjoyed average rental yields of 6% across my 100 properties.