Ian Boden, Sales Director, LendInvest
Location is one of the most important factors for any property investor to consider when looking at expanding their portfolio. You want to buy in the right place, somewhere with a steady supply of tenants and which can deliver strong rental yields and/or good capital growth over the longer term.
It’s all a question of timing – if you want the biggest returns, it’s a good idea to buy in an area on the up, which is about to become more desirable.
The towns with Crossrail (now called the Elizabeth Line) stations are a perfect example here; areas close to a station have seen prices jump by 22% on average in the last two years alone according to Lloyds Bank. Find an area that’s about to be in demand and you’re onto a winner.
In the Buy to Let Index that we put together each quarter, we rank all of the postcodes in England and Wales based on a host of factors including rental price growth, yield and capital gains to determine which areas have been the strongest performers over that three month period. But an additional benefit when you’ve been tracking this data for a while, as we have, is that you can also pick out some of the areas that have seen much improved performance over a longer term, but without necessarily taking the headlines.
In our latest index, we picked out the ten postcodes that have seen the biggest improvements in the rankings over the last year; these are areas that have seen some serious jumps in terms of the returns on offer to property investors, and may represent the buy-to-let hotspots of 2018 and beyond.
Take Hull for example, which has jumped from 99th position in November 2016 to 6th place in the latest index, a rise of an astonishing 93 places. That’s quite the turnaround, from being on the cusp of the bottom 10 to one of the top performers.
There are plenty of factors in this; Hull was of course the UK City of Culture for 2017 and has invested around £100m into its cultural infrastructure, ranging from building new entertainment venues to revitalising areas like the waterfront and fruit market. Add the appeal of a solid local university, and enormous firms like Siemens setting up in the city, and you can see why it has performed so strongly. With property prices incredibly affordable and huge levels of future investment planned, Hull is likely to remain a strong option for landlords for some time.
Cambridge is another town which has seen a vast improvement in its performance for landlords since November 2016, jumping 69 places in our rankings from 83 to 14 in the latest index. The fundamentals are very attractive for property investors here; not only does it boast a prestigious university and great transport links, but you also have the benefits of the city playing host to the big players in the biotech boom. That’s bringing further employment and investment into Cambridge.
Other areas which have seen huge jumps in their rankings in the index include Slough (from 79th to 16th), Leicester (from 57th to 9th) and Portsmouth (from 59th to 23rd).
It’s notable that while so much focus recently has been on northern towns and cities presenting great investment opportunities to landlords, Hull is really the only northern representative on our list of top performers. That should be hugely encouraging to investors across the country, as it demonstrates just how dynamic property investment is at the moment. There are simply so many excellent areas on the up for wily investors to consider.
While there has been an awful lot of doom and gloom around the buy-to-let market in 2017, as brokers and investors have got to grips with the changing tax and regulatory landscape, there remains plenty to be excited about. Demand remains strong – the lack of housing supply is a problem that will take a long time to solve – and while the dinner party landlord may be out to lunch, the professional investor is still well placed to enjoy excellent returns from bricks and mortar.
We have already seen huge interest from investors and brokers since we launched into buy-to-let last year. As the market becomes more professionalised, it makes sense that lenders like LendInvest, who have vast experience of working with borrowers for whom property is their living, not just a hobby on the side, will be well placed to deliver the funding they need. Here’s to more of the same in 2018.
Click here to download the LendInvest Buy-To-Let Index, a comprehensive quarterly analysis of the UK buy-to-let market.