Buy-to-let mortgage demand may be falling through the floor but it doesn’t mean that rental yields have suddenly gone up in smoke. In fact, recent evidence suggest that the UK’s major cities still offer up some pretty compelling numbers.
A recent report from Benham & Reeves showed that investors in Liverpool can enjoy monster double-digit rental yields. More specifically, those purchasing property to let in the L7 and L6 postcodes can soak up yields of 10.7% and 10.4% respectively.
Meanwhile, the L5 postcode which covers the northern part of the City boasts a chubby rental yield of 9.4%.
It’s great up North
What the sales and letting agent’s research also showed was that the big yields in the Scouse city aren’t an anomaly. The Middlesbrough postal code of TS1 also offers rental yields above 10%, at 10.2%, a reading also shared by the Greater Manchester postcode of M14.
Interestingly Benham & Reeves’ data showed that the top 10 most lucrative towns for buy-to-let investors are in the north of England, with Bradford, Sunderland, Newcastle-Upon-Tyne, Sheffield and Nottingham locking out the rest of the list.
The figures prompted agency director Marc von Grundherr to comment that “despite the government’s attempts to dampen the appetite of the sector it remains a lucrative business and… there are plenty of buy-to-let honey pots out there that will bring a great return on your investment.”
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Top UK Postcodes for Rental Yields |
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|
Area |
Avg yield |
Avg price |
|
L7 |
10.70% |
£105,000 |
|
L6 |
10.40% |
£85,000 |
|
TS1 |
10.20% |
£61,000 |
|
M14 |
10.20% |
£163,000 |
|
BD1 |
9.90% |
£58,000 |
|
SR1 |
9.70% |
£68,000 |
|
L5 |
9.40% |
£69,000 |
|
NE6 |
8.50% |
£123,000 |
|
S2 |
8.50% |
£109,000 |
|
NG7 |
8.50% |
£137,000 |
London yields languish
The rental yields that are on offer at the other end of the country certainly blow those currently on offer in London — that previous hotspot for buy-to-let investors before property price growth skidded to a halt more recently — out of the water.
According to Benham & Reeves, the most lucrative postcode in the capital is E6, but this area in Barking still only carries rental yields of 5%. In fact, this little eastern pocket of the city seems to be one of the best destinations for landlords to buy, with the adjacent neighbourhood of Dagenham also in the higher echelons of the yield list.
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Top London Postcodes for Rental Yields |
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|
Area |
Avg yield |
Avg price |
|
E6 |
5.0% |
£357,569 |
|
IG11 |
5.0% |
£305,965 |
|
RM8 |
4.9% |
£319,975 |
|
RM9 |
4.9% |
£306,262 |
|
RM10 |
4.9% |
£319,077 |
|
N18 |
4.8% |
£362,996 |
|
RM13 |
4.8% |
£353,392 |
|
SE28 |
4.8% |
£291,233 |
|
E15 |
4.7% |
£426,876 |
|
EN3 |
4.7% |
£355,416 |
If you’re looking to grab a slice of the property market I reckon that investing in stocks is a better way to go about it. Buying up Unite Group or GCP Student Living can allow you to play the shortage of student accommodation in the UK and make big returns, for example. Warehouse and distribution centre specialist Tritax Big Box is a great play on the fast-growing e-commerce phenomenon. And Safestore and Big Yellow Group are good ways to access the booming self-storage market, in my opinion.
So I’d suggest that you forget about buy-to-let and go shopping for some great shares like these instead. I’m not saying that London’s yields are anything close to bad, but they’re clearly put in the shade by those that can be found in Liverpool and those other northern cities. That doesn’t mean I’d consider investing in those prime buy-to-let destinations though. Fresh cost hikes for landlords introduced last week illustrated the mounting pressure on returns, not to mention the increasing complication of operating rental properties, and I expect conditions for proprietors to get tougher and tougher.
