Property investors seeking the strongest buy-to-let opportunities are navigating to the North, as new research reveals the regions that are pulling in the most interest.
“Landlords quitting the sector” is a well-worn headline at the moment, and while there is a certain level of divestment taking place in the buy-to-let space for a number of reasons, the majority of investors continue to view the UK housing market as a strong choice.
However, adjusting investment strategies is key to securing long-term success, and a combination of higher borrowing costs, reduced affordability, and shifts in tenant demand – among other factors – have led to certain trends ramping up over recent months.
Location is always a top consideration for property investors, who will reap the highest returns by focusing on high-yielding hotspots with strong housing demand to ensure buoyant pricing. For this reason, the North of England is falling more in favour with landlords right now.
Property investors shift focus
This is evidenced by new research from Hamptons, which found that almost four in 10 buy-to-lets purchased during the first four months of this year were located in the Midlands or the North.
This is up from 34% in 2022, which was when interest rates began their steep climb to recent historic highs of 5.25%, having now begun to descend once more matched by lenders pulling out better mortgage rates for borrowers.
Back in 2007, less than a quarter (24%) of property investors targeted the Midlands and North, which shows how far the balance has shifted. This marks a general, gradual increase in the North/South divide seen across the UK property market, as the more expensive areas in the South have flattened while parts of the North have thrived.
This geographical shift, says Hamptons, has provided property investors with “more headroom”, which is particularly significant in light of stamp duty changes creating a higher tax bill, as well as stronger rental yields in northern areas boosting landlords’ returns to offset these higher costs.
Why the North wins out
According to Hamptons, the average property investor buying in the North or the Midlands spent £150,480 on a new buy-to-let so far this year. This is a huge 49% less than investors in the South, who paid an average of £292,240 for a new buy-to-let.
This also equates to an £11,190 saving on stamp duty, which is a huge amount when weighing up the bottom line.
Hamptons has also compared rental yields between northern and southern regions, revealing that gross yields in the North East come out top at an average of 9.3%, followed by the North West (8.2%), the East Midlands (7.2%), Yorkshire and the Humber (7.9%), and the West Midlands (7.8%).
There is then a jump downwards when moving to the South, with the East of England reaping average rental yields of 6.7%, the South West (6.5%), the South West (6.4%), and London (5.7%).
A new investment focus
The highest share of homes bought by landlords so far this year was in the North East, with 28% of total property sales going to property investors. Next was the East Midlands, where 15% of properties where snapped up by landlord buyers, followed by the West Midlands (14%), Yorkshire and the Humber (12%), and the North West (also 12%).
This compares with the South East where only 9% of the total share was bought by a landlord, along with London, the South West and the East of England where the share of homes bought by landlords was only 8%.
The data also shows that London-based investors are increasingly looking beyond the capital, which is likely down to the higher purchase prices compared with greater borrowing and tax costs that come hand-in-hand.
In fact, almost two-thirds (65%) of London-based investors bought a buy-to-let outside the capital this year, which is up from 41% a decade ago, while in 2007 less than a quarter (24%) of London property investors looked further afield.
Ultimately, while there are still opportunities to be found in the South of England, including London where tenant demand will always be strong and the city’s appeal is unlikely to wane, strategic property investors are set to continue to target the North under existing conditions.
If you’re seeking your next buy-to-let property investment in the North or the Midlands, get in touch with BuyAssociation today to find out more about our current and upcoming opportunities.
