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Where can landlords find the best mix of affordability and rental return?

Fresh research using a combination of house prices, salaries and rental prices suggest that Stoke-on-Trent is the best destination to invest in buy-to-let property.

The study, which ranked Britain’s 100 major towns and cities, taking into account the average income, average property price and average rent in each area, has unsurprisingly unveiled a stark north-south divide in efficiency of local buy-to-let investments, with every one of the UK’s top 10 so-called ‘buy-to-let sweet spots’ located in the north and 10 least efficient places to be a landlord entirely dominated by the south.

Stoke-on-Trent in first place was followed by Oldham in second position and Liverpool in third, with the rest of the 10 made up of Leeds, Middlesbrough, Newcastle, Stockton-on-Tees, Gateshead, Rotherham and Rochdale.

Investors can enter the buy-to-let market more easily if their income is relatively high compared to local property prices, and will earn a stronger rate of income return if those properties command high levels of rent relative to their price.

An investor would need a deposit of £29,397 to secure the average buy-to-let purchase in top performer Stoke-on-Trent on a loan-to-value of 75%. Average property prices there have reached just £117,586.

Dan Gandesha, founder of property investment marketplace Property Partner which conducted the research, said: “What our research reveals is a clear North-South divide in the investment opportunities facing buy-to-let landlords.

“We have always been at pains to point out to investors that prime locations such as Kensington and Chelsea can offer some of the lowest yields available, because prices have raced ahead while rents have failed to keep pace.

“It just goes to show, you shouldn’t always follow the crowd and the right investment could be on your doorstep where there is far less overall demand.”

UK’s 10 buy-to-let sweet spots:

Town/City

Average Annual Income

Average Property Price

Average Rent per year

House Price/ Earnings

Annual rental Yield

Yield/ (House Price / Earnings) Score

Stoke-on-Trent

£26,250

£117,586

£6,672.00

4.48

5.67%

1.27%

Oldham

£28,361

£125,307

£6,840.00

4.42

5.46%

1.24%

Liverpool

£29,500

£162,373

£9,672.00

5.50

5.96%

1.08%

Leeds

£31,860

£206,544

£14,292.00

6.48

6.92%

1.07%

Middlesbrough

£27,810

£130,798

£6,540.00

4.70

5.00%

1.06%

Newcastle-upon-

Tyne

£31,788

£170,892

£9,552.00

5.38

5.59%

1.04%

Stockton-on-Tees

£30,134

£141,807

£6,816.00

4.71

4.81%

1.02%

Gateshead

£29,011

£168,644

£9,756.00

5.81

5.78%

1.00%

Rotherham

£29,276

£130,867

£5,640.00

4.47

4.31%

0.96%

Rochdale

£28,397

£165,110

£9,252.00

5.81

5.60%

0.96%

Source: ONS income data for 2016 and Home.co.uk rental and property prices (collated 17/05/17).

The table below shows how the south dominates the bottom of the rankings thanks to high demand pushing up prices, resulting in high capital requirements to enter the market and weaker rental yields.

Potential landlords in Poole face the most challenging investment in buy-to-let followed by Central London, and then Sevenoaks. Fourth from bottom came Bournemouth, followed by Cambridge, Oxford, Winchester, St Albans, Chelmsford and Brighton.

UK’s 10 buy-to-let not-spots:

Town/City

Average Annual Income

Average Property Price

Average Rent per year

House Price/ Earnings

Annual Yield

Yield/ House PE Score

Poole

£31,533

£762,532

£14,808.00

24.18

1.94%

0.08%

Central London

£40,310

£1,052,394

£33,132.00

26.11

3.15%

0.12%

Sevenoaks

£40,316

£764,574

£18,936.00

18.96

2.48%

0.13%

Bournemouth

£30,243

£524,945

£14,076.00

17.36

2.68%

0.15%

Cambridge

£35,760

£581,344

£14,616.00

16.26

2.51%

0.15%

Oxford

£35,090

£634,051

£23,640.00

18.07

3.73%

0.21%

Winchester

£42,682

£595,090

£17,148.00

13.94

2.88%

0.21%

St Albans

£52,759

£620,092

£15,828.00

11.75

2.55%

0.22%

Chelmsford

£38,730

£444,198

£11,256.00

11.47

2.53%

0.22%

Brighton

£33,774

£509,747

£17,640.00

15.09

3.46%

0.23%

Source: ONS income data for 2016 and Home.co.uk rental and property prices (collated 17/05/17).

  • Mark Hempshell

    Yes, cheap places offer better yields. But does that make them a good investment?

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