University Towns Give the Best Yields

An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000.

New research from LendInvest has found that property investors looking to invest in the buy-to-let market should look to university towns in the North West to find the best returns.

According to the report, average annual returns between 2010 and 2015, place Manchester and Liverpool at the top for rental yields, but capital growth and return on investment is dominated by the South. Manchester comes out on top with average annual rental yields over five years with 6.02% followed by 5.15% in Liverpool. London yields are surprisingly low - just 4.86% in outer London and 4.71% in the City.

Research from Savills found that the five largest rental markets outside London are Manchester, Liverpool, Leeds, Bristol and Birmingham — all popular university cities, where an average of 23% of the population live in the private rented sector.

Steve Povall, Managing Director of Residential Estates said, ‘urban areas with a high concentration of students and young professionals will always find the best returns. Multiple house occupations can give high yields, so properties near a university or city centre with multiple bedrooms are always the wisest choice to go for.’

It is important to remember that yields are calculated before maintenance costs, void periods, mortgage payments and letting agent fees. So before acquiring a rental property, ensure you factor in all these costs.

An average residential property in Manchester is just £155,000, while a flat in a good area, costs as little as £120,000. A property in Manchester can provide a 5% minimum cash rental yield and a typical 12% total cash yield, including 7% capital appreciation.

Demand for rental accommodation is strong and by comparison with other regions, housing is cheaper.

House prices in London are about five times what they are in Manchester, but salaries are only 30% higher. Manchester is a very affordable place to live and demand for property is soaring in the City, thanks to the expansion of the MetroLink tram system, the trendy Northern Quarter and the BBC Media City. It has vibrant restaurants, bars, clubs plus a great music scene, galleries and museums.

In the second half of this year, we may start to see a shift in investment focus away from London and towards the more lucrative and profitable BTL areas in the UK. Many investors will be looking at ways to protect potential new investments in 2016 from the impact of the Chancellor new tax measures.