North West and Scotland top buy-to-let yield as smaller towns prove increasingly popular – research

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  • 13/11/2018
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The North West of England and Scotland are revealed as the top UK hotspots for landlords to invest in when hunting for maximum yield while smaller towns are also becoming more attractive for property investors, research has revealed.

 

According to the Shawbrook Bank Buy to Let report, the North West leads the UK with an average yield of 5.4%, followed by Scotland with 5.3% and Yorkshire and the Humber with 5%.

The research, compiled by the Centre for Economics and Business Research (CEBR), predicts annual property price inflation to be more subdued in the five years up to 2023 than over the last few years.

The report forecasts average annual house price predictions for the years 2017 to 2023 to be at 4.5%, compared to an average of seven per cent for the high-growth years of 2014 to 2016.

Stretched affordability ratios, years of weak wage growth and the prospect of further interest rate rises all weigh in on the outlook for house prices in the UK for the next few years, it added.

House price growth was found to have slowed in the capital particularly, with Brexit and the resulting uncertainty regarding the future of the financial services sector in the City of London looming over activity in the prime end of the market, as have higher stamp duty rates.

The Shawbrook report expects price growth in London to continue to trail behind the rest of the country for the next two years.

With landlord investment in London slowing, this improved the attractiveness of other regions for buy-to-let (BTL) investors.

Emma Cox, ‎sales director for commercial mortgages at Shawbrook (pictured), said that lower rental yields in London and affordability constraints for investors has driven interest North, where borrowers are chasing the yield and heading to locations with lower average house prices.

“However, when landlords invest far away from their home turf, they can run the risk of falling foul to local knowledge.

“Smarter local investors may be seeing an opportunity to divest themselves of their less desirable housing stock, so it’s important for buyers to do their research to make sure they understand the local supply and demand before investing,” she added.

 

LendInvest

The latest LendInvest Buy-to-Let report found that Colchester topped the charts for BTL investment, followed by Stockport overtaking Manchester and Leeds.

However, the lender noted that in this quarter, smaller towns in the North and Midlands were starting to make significant gains up the table.

This, it suggested, hinted that investment in regional capitals was having a positive knock on effect.

The Midlands and Central England continue to climb the table as Wolverhampton and Peterborough break into the top ten, while South Eastern cities lost momentum.

The report found that average UK house price was £228,000, 43% higher than the average house price in the North West which stood at £159,000.

Ian Boden, sales director at LendInvest, said smaller towns in both the North and Midlands are making swift gains up the table to rival the typical hot spots in each region.

He added: “Looking towards the center of the UK, Midlands cities Wolverhampton and Peterborough have smashed into the top ten, joining successful regional capital Birmingham. The growing opportunity for BTL investors in these regions reflects a knock on effect of investment in these key cities.”

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