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London property investors targeting north of England for yields

Over the course of 2020, people residing in London invested £54.9 billion in properties away from the capital, which is the highest figure ever recorded. 

More Londoners than ever are seeing the merits of investing in property in the regions of England, according to new research from Hamptons. From first-time buyers to seasoned property investors, people are being lured away from the capital by the better value for money, boosted by the race for space and people seeking better work-life balances.

The research highlights some of the trends that had already been emerging pre-pandemic, but have been exacerbated since the onset of Covid and the restrictions that ensued. Not only that, but regeneration and investment is soaring in some of the major towns and cities as the UK continues to “level up” and take the focus away from London.

2020 saw the highest number of properties purchased by Londoners outside the city since 2007, at 111,780. This accounts for 274,970 bedrooms in homes across the country, traded for 238,990 bedrooms in the capital.

To commute or not to commute?

Inner London is the area that most are departing. Around 40% of all London leavers were from the inner parts of the city, compared to 37% in 2020, says Hamptons.

Many will still want to be within commuting distance of the city, increasing the popularity of some of the surrounding areas in Kent, Essex and Sussex. Reading in Berkshire has been a particularly popular recipient of London-leavers in recent years as Crossrail attracts more people wanting an easy journey into the capital.

The average person leaving London bought a property 34.7 miles away. Among homeowners, the most common trend was to stick to the south of England.

Better yields away from London?

However, those buying additional homes or buy-to-let property investments were much more likely to look further afield. Hamptons found that almost a third of London-based investors were buying properties in the north, where yields are stronger.

The best yields can normally be found in areas like Manchester, Liverpool, Sheffield, Leeds and Birmingham. Rental demand in these locations is on the up, while house prices are more reasonable than in the south. For investors targeting monthly rental yields, these can be the most lucrative locations.

One recent report from Seven Capital using Zoopla data has highlighted the north-west in particular as the best spot for strong yields.

The region has been recognised as the top-performing rental location in the past, and the latest results show it continues to hold its crown, with average rental yields of 4.41% in 2021. Breaking the figures down, the average property price in the north-west is £214,767, so cheaper than the national average. Yet rents here are relatively strong at £790 per month, equating to £9,480 per year.

Flexible working makes other areas appealing

Aneisha Beveridge of Hamptons says that 2021 could be the largest “outmigration from London for at least a generation”. Those leaving the city have changed the shape of the commuter belt, as well as other smaller towns and cities. Covid has served to increase this trend even more.

“The rise of flexible working coupled with affordability barriers have meant that a record 40 per cent of first-time buyers now leave the capital to buy their first home,” she adds. “The capital’s loss is the home counties gain with these buyers prepared to move 24 per cent further than before the pandemic began, taking their wealth and experience with them.”

Hybrid and remote working look set to continue for hundreds of thousands of people. Many businesses are now offering flexible and home-working as standard, and those who do not adapt could face being left behind in the new climate.

But property transactions in general could slow down in 2022, after this year’s “frenzy”, says Beveridge.

She concludes: “We expect the numbers to fall back a little, particularly as house prices outside the capital are set to continue outperforming London over the next few years.  We expect to see the number of London purchases outside the capital average around 85,000 in both 2022 and 2023, around 10,000 more than during the five years leading up to the pandemic.”

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