Property investment is changing

Investors are increasingly looking northward for opportunities to mitigate against high mortgage and stamp duty costs.

According to Hamptons The Home Expert, The average investor buying in the Midlands and North of England paid £150,480 for a new buy-to-let this year – £141,760 (or 49%) less than a landlord who bought in the South of England, where the average purchase price was £292,240. This price differential translates to a £11,190 savings on stamp duty.

Rental yields also tend to be higher in northern regions. In the North East, which remains the capital of buy-to-let investment, the typical new buy-to-let achieved a 9.3% gross yield, outperforming the national average of 7.1%. This higher yield provides investors with greater financial headroom to cover increasing costs related to mortgage payments, maintenance, and taxes.

London investors looking beyond the capital

The North of England is emerging as the new promised land of property investment.. With stamp duty bills becoming a significant barrier to entry in London, an increasing number of London-based investors are buying properties outside the capital. Nearly two-thirds (65%) of London-based investors bought a buy-to-let outside of the capital this year, up from 41% a decade ago and just 24% in 2007.

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.

According to Zoopla, house prices in northern England are rising more than twice as fast as the national average in many places, led by the North West where prices increased by 3% in the year to February. This is in contrast to London and the South East of  England where the increase was only 1%.

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.