Property Market Update: Investors migrate north from London
From the laptop of one of Osprey Sales & Letting’s Directors: Rob Brown
Buy-to-let landlords are increasingly looking to move out of central London to more affordable areas where higher yielding property investments are available, according to the National Landlords Association (NLA). The move follows a fall in rental demand in central London, which largely explains why just 5% of landlords who operate in the heart of the capital say they plan to purchase more properties in the next quarter, the lowest across all regions and down from 15% this time last year.
In contrast, the proportion of landlords operating in the North East and Yorkshire who plan to buy in the next three months has almost doubled.
Carolyn Uphill, chairman of the NLA, said: “It looks like central London is simply becoming too expensive for most people, regardless of whether you want to buy, invest or rent. For many tenants the practical solution of moving out of the city to more affordable suburbs with good transport links is becoming increasingly appealing. In turn, it seems that landlords have been quick to respond, turning their backs on the capital and looking to other areas where the upfront cost of acquiring property is lower, and the potential yields to be had are higher.”
The buy-to-let market has also been severely stung by the government’s war on landlords; with the increased stamp duty and the loss of tax relief on loan interest, many lower yielding properties no longer deliver a positive return. To make buy to let work one needs to operate in areas of higher rental income, so one can still achieve a positive annual cashflow.
Whilst one can achieve yields of 7 or 8% in Lancashire or indeed the city of culture Hull, the yields in the East Midlands are slightly lower at c5-7%. Nonetheless, these are extremely attractive returns compared to London and the South East, and compared to the interest rates on Bank savings accounts at sub 1%! Furthermore we expect rental growth over the next 5 years of around 15-20%.
Remember these yields are in areas that are less than 1hour from Kings Cross; Kettering, Stamford, Peterborough, Northampton. If you do seek yet higher yields we would recommend the city of culture 2017; Hull where we have a property management company and an active investment property business.
We have seen a steady flow of investors coming to us for advice on investment recommendations in the area; if you would like to receive our recommendations then please do give us a call.