An interesting new report has highlighted where you can expect the best yields and rental returns from your buy-to-let investment.
Research from LendInvest assessed where investors are seeing the largest returns, by looking at historical purchase prices from the Land Registry. These prices were then put against average rental prices on property website Zoopla to ascertain where the most profitable regions for buy-to-let investment are in the UK.
Top of the list of towns and cities in the UK came Manchester, with the average rental yield in the city reaching 6.8% between 2010 and 2016.
LendInvest’s Buy To Let Index also found that other high-yielding regions were Outer London, Luton and Coventry, which all offered gross rental returns of 5.8% over the same period.
In terms of capital gains on your investment property, you should look to the west central postcode area of London. If you have landlord insurance here, you can expect an average 11% return.
For overall returns, including both rental yields and capital gains, the east of London came out top, with 17.8%. At the other end of the scale, Sunderland recorded just a 3.2% overall return on investment.
Intriguingly, there was a correlation between how some regions voted in the EU referendum and rental yields. Those living in areas offering the highest rental yields voted to leave the EU, while those in regions with the largest house prices opted to remain.
The Buy-To-Let Index showed that just two of the top twenty local authority districts for rental yields (Manchester and Liverpool) voted to remain. Similarly, only two of the top twenty areas for capital gains (Barking & Dagenham and Spelthorne) voted to leave the EU.
Christian Faes, Co-Founder and CEO of LendInvest, noted, ‘it’s very interesting that the top districts for rental yield which are often found in the North East and North West, voted so overwhelmingly for Brexit.’
‘The areas that have seen the best of the recent boom times have generally enjoyed the biggest house price rises and with that offered the greatest capital gains. Perhaps it is no surprise that they were sufficiently content with the status quo to vote Remain. Areas which have seen far more modest house price rises, appear to have been more disposed to voting for the change promised by Brexit.’
Concluding, Faes noted, ‘Brexit may create opportunities for property investors, particularly professional and experienced ones. House prices are expected to soften, so some would-be buyers may put off buying. But they still need somewhere to live, which is good news for landlords. What’s more, if house prices do cool as predicted, then investing in property will become even more enticing.’