Property investors can still achieve good yields in certain pockets of the market, despite the barrage of tax change that have hit the sector, Shawbrook Bank’s UK Buy to Let report finds.
According to the report compiled by the Centre for Economics and Business Research, the North West and the city of Manchester in particular are the top new investment hot-spots due to higher rental yields.
The report forecasts average annual house price growth for the years 2017 to 2023 to be at 4.5 per cent, compared to an average of 7 per cent for the high-growth years of 2014 to 2016. Stretched affordability ratios, years of weak wage growth and the prospect of further interest rate rises all weigh in on the outlook for house prices in the UK for the next few years, says Shawbrook.
The average UK house price is currently £228,000, 43 per cent higher than the average house price in the North West, the study finds, with average yields of 5.4 per cent possible in the region. Yields of 5.3 per cent are possible in Scotland and 4.9 per cent in Yorkshire and the Humber.
Shawbrook sales director for commercial mortgages Emma Cox says: “Landlords have had a rough ride over the past few years with multiple tax changes, but our research shows that it’s not all doom and gloom for potential investors in 2018. Lower rental yields in London and affordability constraints for investors has driven interest North, where borrowers are chasing the yield and heading to locations with lower average house prices.
“There are still interesting times ahead for savvy investors and good investment opportunities remain. However, when landlords invest far away from their home turf, they can run the risk of falling foul to local knowledge. Smarter local investors may be seeing an opportunity to divest themselves of their less desirable housing stock, so it’s important for buyers to do their research to make sure they understand the local supply and demand before investing.”