New research reveals a continuing north-south divide in rental yields for landlords. So where are the best locations for buy-to-let investors to target?
Online mortgage broker Mojo Mortgages has revealed how postcodes across the UK are currently performing in terms of buy-to-let yields for landlords. The company conducted its research between 18th and 25th May, so it reflects the up-to-date situation taking coronavirus into account.
The findings, which used UK Land Registry, Zoopla, On The Market and Property Data figures, revealed Liverpool as the UK’s top performer. Postcodes in the north-western city appear several times in the top 20 list, making it the highest-yielding location overall. It is also one of the most desirable UK hotspots for investors to consider right now.
The L7 postcode tops the list, where landlords make average yields of 10.3%. The average price of a property in this area is well below the UK average at £95,000. Also scoring highly were L6 with 8.4% yields, L1 with 8.1%, and L15 and L4 both with 7.4%.
North-west strongest for buy-to-let investors
The rental market in the north-west of England scored the highest overall in Mojo’s research. Manchester’s M14 postcode appeared in the top 20 with average yields of 7.6%. The postcode covers the popular Fallowfield area, while Manchester as a whole sees massive rental demand each year.
The Northern Powerhouse region was already a top choice for investors thanks to its rapidly improving housing market. Property prices in the north-west have been growing at the fastest rate in England, while average values remain affordable. Meanwhile, regeneration and investment in the area has been attracting growing numbers of businesses and professionals away from London.
From a property investment perspective, discovering potential rental yields is vital to working out whether an investment is worthwhile. While market sentiment normally has an influence on property prices, rental demand as well as rent prices tend to be more consistent.
Nick Sherratt, MD and co-founder of Mojo Mortgages, said: “Our research has shown that there is a clear north and south divide, with areas in Scotland and the north-west, Liverpool in particular, generating strong yields. Property prices in the north are also known for being low, therefore, making these areas incredibly investable.”
“When it comes to the worst areas to invest in, a number of postcodes in London top that list. Properties in the City of London and its surrounding boroughs generate the lowest yields in the UK, whilst average prices to buy are way above the £1,000,000 mark.”
Buy-to-let mortgages: back in business
In recent weeks, buy-to-let investors will have found that the mortgage market is tipping back in their favour. After some lenders withdrew or restricted products due to the lockdown, most are now back in business. Loan to value levels are creeping back up, product numbers are replenishing and interest rates are competitive.
According to Nick Sherratt, this is a big boost for the rental market. Investors who may have had to place plans on hold can now largely press ahead.
“Now that the lockdown is easing, and the housing market is starting to recover, we’ve had a number of enquiries from landlords who are looking to either remortgage or grow their portfolios.”
“We’ve also seen lenders such as Barclays, Accord Mortgages and Skipton International cut rates and raise their lending thresholds. Plus, The Mortgage Works has just introduced a one-year buy-to-let fixed rate product at 1 per cent interest rate.
“There is definitely some positive movements happening in the market and we thought carrying out this research would be really useful for those who do have the money to invest.”