The North West of England tops the charts as thebest place to invest for high annual rental yields, whereas the South Eastbenefits from huge increases in house prices.
The North West of England tops the charts as thebest place to invest for high annual rental yields, whereas the South Eastbenefits from huge increases in house prices
Despite George Osborne announcinganadditional3% Stamp Duty to be levied on the purchase of additional properties in his 2016Budget,investing in property can still be profitable, and here are the mostlucrative areas to invest.
The North West of England toppedthe tables as the most lucrative area to invest in property to achieve high rentalyields; and with four renters vying for each property, there’s no shortage ofdemand. Conversely, those who have invested in the South East and London wouldbenefit from the increase in house prices.Invest in Property in the North West of Englandto Achieve High Rental Yields
Morespecifically, Manchester tops the poll as the best place to invest if you wishto achieve high rental yields. The yield is calculated by taking into accountthe average monthly rent and working it out as a percentage of the property’smarket price. The average rental yield in Manchester is 6.02% and Liverpoolcame in a close second. The full list is below:
Outer London 4.86%
Rochester / Medway 4.79%Manchester Named Best Place to Invest inProperty
Manchester tops the table as thebest place to invest to achieve high rental yields. Not only can investorsachieve high rental yields here, there is also a sizeable rental sector. 26.85%of the housing stock is privately rented, which is above the national averageof 18% and assures investors that there will be a strong demand for property. Manchesteris also home to 60% more 25-29 year olds (those most likely to rent) thananywhere else in the UK.The Best Northern Cities to Invest in PropertyOutside of Manchester
Liverpool comes in a close secondon the table of the best places to invest in property to achieve high rentalyields. Liverpool is undergoing several regeneration schemesfocusing onLiverpool docks and housing that upon completion will only raise house pricesin the area as it increases in desirability. Liverpool’s L1 postcode inparticular is on the up, still remaining affordable but having experienced arise in house prices of 41.2%.
Liverpool’s huge studentpopulation means that there is always a requirement for accommodation, and thiscoupled with low house prices and high rental values allows investors tomaximize their yields.
Student accommodation investmentsin Liverpool such as PembrokeStudio sare particularly good attractive, guaranteeing immediate income,zero development risk and 8% net rental income guaranteed for 5 years. Thedevelopment’s proximity to several universities including Liverpool John Mooresand the University of Liverpool only enhances its appeal to Liverpool’s50,000-strong student population.
Sheffield is also forecasted to experience some of the highest rentalyield growth over the coming years. This can partly be attributed to a shortageof high quality housing stock in the city, but also the city has been named thesecond “northern powerhouse”; a scheme to increase investment and devolvepowers to northern towns and cities such as Hull, Manchester and Sheffield. Traditionallya steel manufacturing city, Sheffield’s focus has turned towards tech and it isnow the 9thlargest tech centre in the country. Other tech citiesinclude London and Cambridge, however the cost of living in both is becomingincreasingly out of reach for most, so Sheffield is seen as a suitablealternative by many.
Sheffield’s growth makes it a viable city for buy-to-let property investment . AlthoughSheffield didn’t officially make the top ten best places to invest in propertyin the UK, the S1 postcode achieves some of the highest gross yields in thewhole of the UK. Investors can buy a property in the S1 postcode for under£70,000 and generate gross yields of up to 11%. This, coupled with thegrowing tech industry in the city means that demand for housing can only rise.
Cities such as Cardiff and Coventry also command excellent rentalyields, due to relatively low property prices. In particular, Cardiff has seenfinance and business services employment growth of 4.4%, outstripping the rest ofWales and the UK as a whole. These improving economic conditions in Cardiffmean that many anticipate a rise in demand for rental properties in the area.With businesses and investors finally seeing the benefits in cities other thanLondon, it is no surprise that property in these areas is increasingly becomingmore desirable.
The South East tops the tables when it comes to capital gains, withproperty investments in inner London generating an annualised return of 7.9%and properties in Cambridge generating 5.99%. With regards to rental yields,when compared to the North, the South East performs poorly and nine out of tenof the worst performing postcodes are based in the South East and London. Thisis mainly due to soaring house prices, which of course is good to generate highcapital gains, but negatively affects rental yield.
Investors may find it easier and safer to invest in the North wherehouse prices are relatively low, rather than take arisk with propertyinvestments in the South East, where house prices are high. Although propertiesin London and the South East generate a much higher annualised return, manyinvestors find that they do not want to invest so much money into a property asthe risk is much higher. To generate a steady income with lower risk, werecommend considering places such as Manchester, Liverpool and Sheffield toinvest in property. The benefit of investing in Manchester and Liverpool inparticular is that even though property prices are currently low, they arepredicted to experience the biggest growth in house prices due to graduatesdeciding to stay after completing their education. As mentioned previously, theL1 postcode in Liverpool is home to some of the largestproperty price increasesin the country, experiencing a 41.2% growth in the last year alone. Averageproperty prices in the area went from £85,000 between December 2011 andNovember 2014 to £120,000 for the year to November 2015. Manchester, Liverpooland Sheffield are still affordable but we advise early investment to benefitfrom the predicted rise in house prices.