The towns that offer the best buy-to-let returns
Rental returns on buy-to-let are biggest in regional centres like Southampton, Manchester and Nottingham – where one in four homes are now privately rented
12:22PM BST 28 May 2014
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Property investors are looking way beyond London and identifying regions where yields are almost three times as high as in the capital. Cities offering the greatest yields – rental income measured against the property's cost – include Southampton, Blackpool, Nottingham and Hull.
The latest data on buy-to-let returns, from lender HSBC, also shows the proportion of property in each area already owned by landlords. And in many of the top-yielding areas private landlords already own one in four properties, or more.
Southampton, with rental yields of 8.73pc, currently tops the list for rental returns. Manchester, Nottingham, Blackpool and Hull complete the top five locations with the best rental yield at 7.98pc, 7.67pc, 7.63pc and 7.47pc respectively. In all of these areas, except Hull, private landlords already own one in five properties, or more.
These areas also offer the characteristics that make for excellent buy-to-let investment, the experts say: relatively low house prices coupled with strong demand for rental property from large student and young professional populations.
| Rank | Location | Housing privately rented (%) | Average house price | Average monthly rent | Gross rental yield (%) |
|---|---|---|---|---|---|
| 1 | Southampton | 23.42 | £143,011 | £1,040 | 8.73 |
| 2 | Manchester | 26.85 | £104,244 | £693 | 7.98 |
| 3 | Nottingham | 21.64 | £86,000 | £550 | 7.67 |
| 4 | Blackpool | 24.16 | £77,899 | £495 | 7.63 |
| 5 | Kingston upon Hull | 19.02 | £68,243 | £425 | 7.47 |
| 6 | Coventry | 19.02 | £110,029 | £650 | 7.09 |
| 7 | Oxford | 26.11 | £254,514 | £1,489 | 7.02 |
| 8 | Portsmouth | 22.28 | £146,709 | £795 | 6.50 |
| 9 | Liverpool | 21.75 | £91,175 | £494 | 6.50 |
| 10 | Cambridge | 23.91 | £185,414 | £1,001 | 6.48 |
The lowest yields were registered in areas such as London where recent price rises have been large and rapid, outpacing the growth in rents.
In London in particular, there is a higher proportion of rental property than elsewhere, with 38pc of property in Westminster, for example, being privately rented.
Worst 10 buy-to-let areas by rental yields
| Location | Housing privately rented (%) | Average house price | Average monthly rent | Gross rental yield (%) |
|---|---|---|---|---|
| Kensington and Chelsea | 33.97 | £1,236,605 | £2,968 | 2.88 |
| Thanet | 21.96 | £189,362 | £524 | 3.32 |
| Hastings | 27.19 | £184,787 | £520 | 3.38 |
| Haringey | 30.33 | £425,541 | £1,200 | 3.38 |
| Westminster | 37.56 | £890,272 | £2,578 | 3.47 |
| Hammersmith and Fulham | 30.05 | £685,797 | £2,004 | 3.51 |
| Richmond upon Thames | 20.55 | £540,379 | £1,699 | 3.77 |
| Camden | 30.46 | £715,831 | £2,383 | 3.99 |
| Ipswich | 18.75 | £158,925 | £546 | 4.12 |
| Lincoln | 19.36 | £124,789 | £433 | 4.16 |
Peter Dockar, head of mortgages at HSBC said: “House prices in the top-yielding locations – while still out of reach among many first time buyers – are relatively affordable for landlords investing in property and the demand from young professionals has pushed up rents and driven up the returns.
“London is often seen as the haven of property investment with many believing the streets are paved with gold. However, while the highest rents in the country are an attractive draw for landlords, high house prices in the capital squeeze yields and limit the returns available. As a result, returns can often be far more attractive in other areas so it certainly pays for landlords to do their research.”
HSBC's report draws on official data from the Office for National Statistics and Land Registry with rental data coming Home.co.uk.
http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10859896/The-towns-that-offer-the-best-buy-to-let-returns.html
