Choosing the right location for your buy-to-let investment relies on a multitude of factors. Among other things, landlords need to weigh up convenience as well as profitability to pinpoint the best spot.
Whether you’re an experienced property investor or prospective one about to step onto the housing investment ladder, where you invest is hugely important. The UK housing market is an ever-changing sector, and buy-to-let opportunities vary across the country. Even for seasoned landlords who tend to stick to tried and tested locations, staying ahead of the market is one of the best ways to maintain a successful business.
The north-south divide often comes into play when choosing where to invest. Many investors still naturally prefer to stick to London, the economic centre of the country. Historically, house prices there have always increased, while rental demand is unlikely to significantly diminish.
However, it is also important to look at the bigger picture. Profitability in terms of yields can often be higher if you choose an area with high rental demand but lower house prices. And a new study conducted by CIA Landlord has pinpointed some key areas that are highly profitable right now.
Where to take advantage of stamp duty savings
The past few weeks, the UK property market has been bustling with buyers trying to take advantage of the government’s stamp duty cut. Until March 2021, buyers only pay stamp duty above the new £500,000 threshold. For second homes and investments, only the 3% surcharge is payable.
CIA Landlord has revealed a list of cities that rank top for profitability based on new data. It uses house prices compared with rental income to work out where buyers should invest to benefit from the stamp duty cut.
Salford in Greater Manchester takes the top spot for profitability for buy-to-let landlords. It scores a profitability rating of 6.27 out of 10. This is thanks to its below average house prices at £173,311, along with relatively high rental incomes of an average £1,052 per month. CIA puts the average stamp duty saving in this area at £966.
Manchester itself is next on the list, with a profitability score of 6.26 out of 10. Property is slightly more expensive here, at £193,681 on average. However, landlords also get a higher rental income of an average £1,141 per month, and stamp duty savings come in at £1,374.
Leeds comes in as the third best place in the UK to invest in buy-to-let right now. CIA has given the city a score of 6.20 out of 10, with stamp duty savings of an impressive £1,848 per property purchase. Average house prices are around £217,415, while monthly rents are around £1,216.
Best London buy-to-let
In general, the south of England scores lower on CIA Landlord’s rankings for buy-to-let. This is because house prices tend to be much higher, and don’t necessarily correspond to significantly higher rents. However, there are many plus points to investing in London and the south-east too, such as high rental demand in many areas.
The study lists the borough of Havering in London as the most profitable area to invest right now. Buyers here can still take advantage of the stamp duty saving, as house prices are an average £395,832. Landlords tend to make around £1,895 per month from rent. And according to CIA, buyers can save as much as £9,000 thanks to the stamp duty holiday.
Newham is another spot where profitability is high in London, at 5.92 out of 10. The average property costs £353,705, so well below the threshold. Monthly rents come in at £1,531, with stamp duty savings of £7,735 for investors who buy now.
In third place for London buy-to-let is Barking and Dagenham. This borough is an even cheaper area to buy, with average homes costing £302,060. Monthly rents are a healthy £1,353, and buyers can now save £5,103 in stamp duty costs. CIA has given it a score of 5.77 out of 10 for profitability.
BuyAssociation has a wide range of property investment opportunities available across the UK. From buy-to-lets and HMOs to owner-occupier homes, all our projects are direct from the developer. Sign up for free to get early access to our best deals, or get in touch for more information.