Investors in the property market in the UK have been welcoming increasingly impressive returns for the past year, with yields in a number of asset classes strengthening and predictions showing that this is a reality that’s set to continue.
However, for some time, the market has been changing as it strengthens. In recent months, investors in the buy-to-let market in particular have been told to head north for better property returns. It seems that many have been paying attention, particularly in the south, with new figures showing that many London and south-east-based buyers are investing further north as they seek the strongest yields.
According to figures, more than a third of people who are now investing in the buy-to-let sector are from Greater London, while two-thirds of these in general come from the south-east of England.
So why are so many people looking to the north instead of in London, which was always seen by investors are the property safe haven of the UK?
The biggest reason, without a doubt, is rental yield. Traditionally, London yields were driven by demand, which made them the best around. However, savvy investors are now aware that the high purchase price can mean their investment return sitting lower than it may have done in the past.
In fact, HSBC reports that in some areas of the capital, yields have dropped to nearly 2.5 per cent. Conversely, cheaper buy-in prices in the initial stage and a stronger level of demand has meant that northern regions are now able to welcome much better yields.
HSBC’s report in December showed that Manchester, Liverpool, Nottingham and Sheffield are among the very best places to invest in buy-to-let properties because of their strong yields. In Manchester, investors are bringing in almost eight per cent yields, which investors in the south can’t fail to notice.
This has largely been driven by the fact that demand has increased in Manchester thanks to a swelling business sector. As the BBC relocated to Salford and brought with it the rise of the area’s MediaCityUK, more and more young professionals were relocating from the south, which saw rental prices in the city climb.
It’s a similar story throughout the north of the country, with Liverpool investors able to bring in a yield of around 6.5 per cent, and those putting their money into Nottingham can get returns of more than 7.5 per cent.
Another reason for such an appetite for investment in the north from London-based buyers is the fact that they can buy below market value property which gives them stronger returns. On top of this, they can also invest in passive stock, which allows them to simply buy and then handover the management of the property.
These types of investment are also popular because they often offer guaranteed returns for a set number of years, which is a safety net for London investors that is very much appreciated.