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Most attractive cities for BTL landlords revealed

London and Manchester has been named by landlords as the most attractive cities to invest in buy-to-let (BTL) properties in 2020 according to Simply Business.

The research shows that the two cities were where landlords expect the BTL market to be most robust this year, with both receiving over a third of votes when asked which city represents the best investment opportunity.

Liverpool and Birmingham followed closely behind as BTL hotspots, with both cities securing 10% of the vote amongst landlords when considering where their next investment in 2020 lies.

Bea Montoya, chief operating officer at Simply Business, said: “Buy-to-let landlords are crucial to the UK economy, contributing a combined £16.1bn through pre-tax spending.

“The sector also now houses 20% of British households and has a huge presence up and down the country, so it’s wholly encouraging that landlords view a broad spread of regions as attractive areas to invest this year.

“London usually comes out on top for being the most expensive city to invest in property in the UK, but falling house prices are making it an attractive place to invest once again.

“We know a quarter of landlords are planning to sell at least one property this year, largely due to government reform and tax changes, so it’s reassuring to see that landlords are still eyeing up investment opportunities up and down the country.”

By Jessica Nangle

Source: Mortgage Introducer

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Top spots for buy to let named

Scotland has been crowned the best place for landlords to invest as research has shown the average yield for Scottish buy-to-let properties scoops the rest of the UK.

The findings from lettings platform Howsy, published today (October 2), showed Glasgow City was the overall best place to invest in buy-to-let property with a current rental yield of 7.5 per cent.

Midlothian and East Ayrshire, both in Scotland, were close behind with rental yields of 6.8 per cent, while Scottish county West Dunbartonshire was fourth at 6.7 per cent.

“After years of being slammed by regulatory changes making it harder to turn a profit, choosing where to invest has never been more important for landlords.”
Chris Sykes, broker at Private Finance
The research showed Burnley and Belfast were offering yields of 6.5 per cent, while Inverclyde offered 6.4 per cent, followed by Falkirk (6.3 per cent), the Western Isles (6.2 per cent) and Clackmannanshire (6.1 per cent) to complete the top 10.

Wales fared worst among the home countries with an average yield of 3.7 per cent compared with Scotland’s 5.7 per cent.

Landlords in England and Northern Ireland receive average yields of 4.1 per cent and 5.4 per cent respectively.

Chris Sykes, broker at Private Finance, said: “After years of being slammed by regulatory changes making it harder to turn a profit, choosing where to invest has never been more important for landlords.

“Generally speaking, properties further north tend to require a smaller initial investment. Glasgow, which tops Howsy’s list, has an average house price of just £135,121.

“Being a major city and university town, the area also benefits from strong rental demand so this combination of low property prices and decent regular rental income is a winning formula for investors.”

The buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have hit landlords’ pockets.

How the rules changed:
An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

Mr Sykes said mortgage repayments often represented a large chunk of landlords’ costs, so getting as low a rate as possible was important to achieve a profitable rental yield.

He said lenders were currently offering very competitive buy-to-let product rates, both as a result of the wider low-rate environment and in a bid to attract more business given the slowdown the sector has experienced in recent years so now was the right time for landlords to remortgage onto a “rock-bottom rate” to maximise their overall profits.

Founder and chief executive of Howsy, Calum Brannan, said technology had helped landlords connect with their tenants more easily which meant they were no longer restricted to investing within the local vicinity to keep tabs on their property or forced to pay large fees for an agent to do so.

He said: “This leaves them free to buy in one section of the market and invest in another to maximise their financial gain across the board.

“More accessibility via digital rental platforms now provides landlords with greater empowerment when managing their property portfolio and they can do so anytime, day or night, with greater peace of mind.”

The research also showed which locations offered the highest annual house price growth for those looking to buy.

North Devon topped the list with expected growth of 15 per cent, while Welsh locations Merthyr Tydfil and Blaenau Gwent came in second and third place.

England had the lowest annual house price growth of the home countries at 0.3 per cent, while Wales stormed ahead with 4.2 per cent.

Location:Annual House Price Growth:
North Devon15%
Merthyr Tydfil13%
Blaenau Gwent13%
West Devon9%
Forest Heath9%
Home countries: 
Northern Ireland1.6%
United Kingdom0.7%

By Imogen Tew

Source: FT Adviser

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Nottingham tops table of UK’s best buy-to-let locations

A survey of more than 580,000 properties across England, Scotland, and Wales by TotallyMoney, which ranked postcodes in order of highest buy-to-let yields, to lowest, found that locations with a high student population, like Nottingham, Liverpool, Manchester, Leeds, and the North East, offer some of the UK’s highest rental yields.

Properties in Nottingham, which has a student population of over 37,000, appears to offer particularly good returns, with two postcodes featuring in the top five.

NG1 takes first place with an average rental yield of 11.99 per cent, and NG7 takes fifth place with an average yield of 8.89 per cent.

Property prices are also affordable, averaging £152,631 and £160,269 respectively – far below the UK average of £226,906.

Liverpool ranks in second place, with two postcodes in the top five, and five postcodes in the top 20. It has an approximate student population of 70,000, as well as three universities, which is thought to contribute highly to its strong yields.

Postcode L7 takes second place and has average rental yields of 9.79 per cent. L1 also performs well, taking fifth place, with average yields of 9.33 per cent.

Newcastle’s NE6 takes sixth place, with an average rental yield of 8.43 per cent.

Property prices here are far below the UK average at £118,789, with Newcastle and Northumbria universities approximately 30 minutes away on public transport.

Similarly, Newcastle’s NE1 has yields of 8.16 per cent, and is within walking distance to both universities. Property prices, however, are slightly higher at £161,035, but are still below the UK average.

In stark contrast, London struggled to perform well compared with its UK counterparts.

TotallyMoney’s head of brand and marketing communications, Mark Moloney, said: “With students flocking to university cities year after year and looking for a place to live, it’s no surprise the student market is a dependable one for landlords.

“Since so many students are looking for accommodation, landlords may use this as an opportunity to drum up competition between them.

“But, due to the tenant fee ban, changes in mortgage tax relief, and tighter buy-to-let lending criteria, rental profits are now being squeezed more than ever.

“To maximise their returns, landlords need to be savvier — and that’s where our map and mortgage comparison tool can help.”

Source: Simple Landlords Insurance

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Southend Tops Buy To Let Property Investment Table

Southend tops the buy to let property investment market for rental yields according to recent research.

New analysis from Private Finance reveals Southend-on-Sea is the UK’s number one buy to let hotspot for investment, offering average rental yields of 6.6 per cent once mortgage costs are taken into account.

The analysis – which calculates rental yields in the 50 UK towns and cities with the highest proportion of private rental housing stock – highlights that house prices and mortgage costs can be just as influential as rental income when assessing the best locations to invest.

An annual rental income of £23,280 means that landlords in Southend enjoy a lucrative return for a relatively small upfront investment, with house prices in the area only slightly higher than the national average (£279,358 against £231,000).

Four out of 10 areas with the highest rental yields feature in the top ten buy to let hotspots – Westminster, Camden, Tower Hamlets and Southend-on-Sea – but an equal number of areas with the lowest house prices also feature in the top ten list.

Liverpool, Nottingham, Greater Manchester and Coventry all feature in the top 10 and benefit from some of the lowest house prices in the UK, suggesting potential buy to let property investors should not only consider potential rental income when assessing where to invest.

This is also encouraging news for buy to let property investors with smaller sums to invest, demonstrating you don’t need to spend millions to secure a lucrative property investment.

Director at Private Finance, Shaun Church, commented: Southend is a popular spot for renters, with all the benefits of living in a popular seaside town less than an hour’s commute from Central London, and with good airport connections.’

He continued: ‘With the high cost of renting pricing many out of the city, towns in a commutable distance from London that offer a more relaxed lifestyle at an affordable price are becoming increasingly popular among young professionals. Rental demand is likely to grow in these pockets outside of London, offering good opportunities for buy to let investors.’

Top Ten Buy to Let Hotspots by Average Net Rental Yield

Location Percentage of Privately Rented Housing Stock Average house price (July 18) Average house price (July 17) Mortgage costs (interest-only) Average Rent 2018 (Monthly) Average Rent 2018 (Annual) Net Rental Yield Aug 2018
Southend-on-Sea 20.72% £279,358 £272,873 £4,840 £1,940 £23,280 6.6%
Nottingham 21.64% £137,835 £134,019 £2,388 £928 £11,136 6.4%
Westminster 37.56% £970,990 £1,058,953 £16,822 £5,554 £66,648 5.1%
Edinburgh 20.48% £254,170 £239,016 £4,403 £1,410 £16,920 4.9%
Greater Manchester 26.85% £167,928 £160,001 £2,909 £911 £10,932 4.8%
Liverpool 21.75% £136,521 £127,060 £2,365 £725 £8,700 4.6%
Tower Hamlets 30.84% £473,327 £449,170 £8,200 £2,447 £29,364 4.5%
Camden 30.46% £810,708 £865,076 £14,046 £4,178 £50,136 4.5%
Coventry 19.02% £185,990 £175,375 £3,222 £952 £11,424 4.4%
Southampton 23.42% £212,155 £205,687 £3,676 £1,045 £12,540 4.2%

Source: Residential Landlord