Cities such as Birmingham and Nottingham are increasingly popular, while further north, Liverpool, Manchester and Leeds are hives of activity for landlords looking to expand portfolios – particularly if they’ve recently sold up in London or the South East.
We’ve seen our fair share of lending in these locations, but contrary to the tide of surveys tipping Birmingham as this year’s buy-to-let hotspot, I believe London is still a great market.
Now, hands up, I know the vast majority of brokers are outside the capital – I live in the Midlands myself and know how frustrating it can be to read about London’s housing market as though the rest of the UK was exactly the same. It’s not. But bear with me, because I think London might be a better prospect than the headlines would have you believe at the moment.
A deeper dive into the Capital
We recently commissioned some exclusive research from BDRC and found some interesting numbers that tally with our own experience.
London has been through a couple of years of house prices under pressure and there is definitely evidence that a lot of landlords in the capital have been offloading unprofitable properties following the tax relief changes.
Brexit has also prompted many of the big banking and financial services providers headquartered in London to move staff back to the continent over the past couple of years, putting a severe dent on demand for premium rental stock in central London. Rental incomes suffered as a result.
There’s also been a lot of new stock of flats for rent coming onto the London market over the past 24 months, adding to the pressure on rents.
The combination of these factors means that now, savvy landlords are finding there are some good deals to be had in the capital – an area of the UK that has historically always delivered excellent capital growth.
For example, BDRC found that the situation in central London is showing signs of improvement with a 5 per cent increase in the proportion of landlords reporting increasing demand from tenants. The proportion of landlords reporting falling rents in central London in Q2 has also halved from Q1.
According to BDRC’s research, mean rental yields in the capital remain strong with central London returning 6.2 per cent and outer London 5.9 per cent. These are not insignificant returns, and where properties are flooding onto the market, there’s also plenty of scope to get a decent discount on purchase prices, which can go some way to offsetting the higher stamp duty costs.
In spite of the tide of so-called ‘dire’ warnings about the property market in London, we think there’s opportunity to be found.