GoCompare launches tool to find best areas for buy to let with Manchester in top position
The finding come from an interactive tool launched by GoCompare, that allows users to compare two different cities showing the best option for buy-to-let.
The tool compares cities across data points, including average property price and rental yields, population under 35, number of properties available, number of letting or maintenance agencies, number of new housing developments, properties currently available for rent and rental price growth.
Average Property Price
By towns, Stoke-on-Trent is the least expensive area to buy property with an average property price of £106k.
Oxford is one of the most expensive cities to buy a property with a price of £411k.
And London is in first position with the highest price, at an average of £484k, therefore renting a property out in the capital is an option that needs to be consider really carefully, according to GoCompare.
Rental Price Growth
Manchester takes the leading position on the ranking with growth of 5.76%.
The second position on the ranking with 5.30% growth is Leicester.
Cardiff is in the third position with a growth of 5%.
Manchester holds the top position. The average yield there is 5.55%, putting property owners in the city in a great position.
Sunderland takes the second position for yield with 5.37%.
Liverpool is a hotspot for owners, occupying the third place with an average yield of 5.05%.
Rents up 2.4% as market continues to shift away from London – Your Move
On a non-seasonally adjusted basis, average rent was £924 per month across the UK.
The index also revealed that rental prices in the East of England rose faster than anywhere else in the UK in the year to October, with the average price standing now at £887 – representing a 6% annual jump.
Martyn Alderton, national lettings director at Your Move and Reeds Rains, said: “Across England and Wales, rents have grown by 2.4% in the last year although some areas, such as the East of England, have performed above that level.”
Meanwhile, the focus of the rental market continues to move away from London and the South East, as other areas have become headline growth drivers.
Despite being the most expensive place to rent a property – with the average house being let at £1,276 – London was one of two areas to see rents fall, the other being the North East. In both areas, rents fell by 1% in the last 12 months.
The North East remains the cheapest place to rent, with the average price at £535.
Other areas in the UK to see strong price increases were the North West, where rents grew by 3.1% to reach £633 per month, and the East Midlands, which saw a 3.2% hike to a £648 average.
Following a period of pressure on landlords, yield levels across England and Wales have stabilised. The index found that the typical yield in surveyed regions remained flat between September and October, meaning that the average UK yield levelled at 4.4% in October.
Yet, compared with the same time last year, properties were generating smaller returns – October 2016 saw a 4.8% average yield.
“As we approach winter, the heat has been taken out of the rental market and price growth has slowed,” said Alderton.
He continued: “While prices in most areas have continued to rise, it has been at a slower pace than we had been used to in recent years.”
Tenant arrears up
Furthermore, the average property in the North East had a 5.1% higher yield than any other surveyed area, while the North West saw a 5% yield rate this month.
And continuing from market trends, London properties delivered the smallest percentage returns to owners, with the typical property generating a yield of 3.2%.
Your Move also found that the proportion of tenants in arrears rose between September and October, with households in arrears reaching 12.1%. While this is above the 8.7% recorded in September, the October figures remain below the 12.8% found in August and 13.7% recorded in July.
The highest recorded level of tenants in arrears was in February 2010, at 14.6%.
Luton tops UK buy-to-let index
The Bedfordshire town saw rental prices jump 10% during the year from September 2015 to August 2016. It was closely followed by neighbour Stevenage, which saw a 9% boost.
The top 10 postcodes are predominantly in the South East, LendInvest said, as it released its quarterly research on the market. The only location outside the region was Northampton, which was rated fourth.
The new format index ranks postcodes on capital value growth, transaction volumes, yield and rental price growth. Enfield in North London was ranked third overall but saw the largest capital gains at 17.4%.
Christian Faes, co-founder and chief executive of LendInvest, said there are a host of different factors that investors must take into account before buying, but that capital value growth is key.
“The big one is of course capital values – you want to buy a property that is going to increase in value during your ownership. The prospects for further house price growth is good – we still aren’t building anywhere near enough homes in the UK – but there are regional differences to take into account,” he said.
“The capital value growth seen in postcodes in the South East are significantly higher than those elsewhere in England and Wales.”
Faes added: “However, it’s certainly not the only thing to look out for. Investors also need to measure up the prospects for rental price growth, how active the local market is, and the overall rental yield. Areas that perform well in all of these metrics are winners for property investors.”
The top 10 buy-to-let postcodes (September 2015-August 2016)
||Rental price growth
||Transaction volume growth