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Property investors head north for higher returns

A growing number of buy-to-let investors are heading north for better returns, according to Hamptons International.

But while investor demand for property in northern parts of England has increased, the property firm reports that fewer London-based are investing in the capital. 

The number of London landlords investing in the capital has fallen 31% since 2010, while London investors buying in the North and the Midlands has risen by 34%, owed in part to the introduction of the stamp duty surcharge on second home purchases. 

A landlord investing in buy-to-let in London over the past 12 months faced a £24,600 stamp duty bill on average, compared to £5,330 for an investor buying outside the capital. This has resulted in landlords spending £11,760 more than they were before the stamp duty changes in early 2016, but investors purchasing outside of London are only paying £3,910 more.

Proportion of London-based landlords who bought buy-to-lets outside the capital

Where London landlords purchase buy-to-lets (past 12 months) 

Region

London-based landlords investing

Change since 2010

Change since 2015

London

41%

-34%

-17%

South East

11%

5%

-2%

East Midlands

10%

8%

6%

East

10%

-1%

-2%

North West

9%

9%

1%

Yorkshire and the Humber

6%

6%

6%

West Midlands

6%

5%

2%

South West

3%

-1%

1%

North East

2%

2%

1%

Scotland

1%

1%

1%

Wales

<1%

0%

0%

Source: Hampton International

Proportion of London-based landlords who bought buy-to-lets outside the capital

Property investors head north for higher returns

Reflecting on the data provided by Hamptons International, Mish Liyanage, managing director of The Mistoria Group, commented: “The research shows that just one in four London-based landlords purchased a buy-to-let outside the capital in 2010. However, over recent years, landlords in the capital have looked outside the South East for better returns and more affordable BTL property.

“We have seen a steady stream of London investors looking to acquire property in the North West. Since the introduction of stamp duty of second homes.  A combination of a stamp duty surcharge on second homes and high house price growth has pushed landlords away from the capital and the south east, over the past three years.

“City investors are looking for property in the North West, especially in the university cities, where they can enjoy yields of between 8-13%. For example in Liverpool, investors can acquire a high quality three-bed, fully let HMO near a university, which will house students from £120,000 upwards. 

“Student house share rents start at around £80 per week per room, including bills. However, ensuites and large bedrooms can be as high as £110 per week. There is high demand for new and renovated shared accommodation for students and young professionals many of which are looking for affordable, shared accommodation.

“Rental yields with-in a mile’s radius from the university and city are excellent. The return on investment is very attractive too, with an average of 13% per annum [8% cash rental and 5% capital growth].”

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