Investors can accrue strong returns from buy-to-let. Some markets are more lucrative for buy-to-let investors, with recently released data indicating that renting to students can provide significant returns, writes Richard Carr.
Changing British market
The Guardian writes that buy-to-let investors earned average returns of 1,400% from 1996, when specialist buy-to-let mortgages were first introduced, until the end of 2014. However according to What Mortgage, the British government has recently introduced a number of measures which could make buy-to-let a less profitable investment strategy for UK-based investors.
But a study conducted by property crowdfunding firm Property Partner indicates that letting property to students can still prove lucrative. Buy-to-let investor interest in this market usually crests at this point in the year, as students are moving through the housing system before starting university, providing landlords with many opportunities to attract tenants.
Property Partners’ analysis shows that some university cities are more profitable than others, with Sunderland topping the rankings. Low house prices (£65,200 on average), along with moderate average monthly rents (£575), allow landlords in Sunderland to rack up phenomenal buy-to-let returns of 10.6% The only other region that came close was Teesside/Middlesbrough, with returns of 9.1%.
According to Property Partners’ research, the most profitable student buy-to-let cities largely lie in the North of England. Other prominent Northern areas with high returns listed in these rankings include Salford (6.8%), the Manchester Metropolitan area (6.7%) and Newcastle/Northumbria (6.6%).
This corroborates the findings from a City Residential report, indicating that Northern cities such as Leeds, Liverpool and Manchester are rising hotspots for property investment. Liverpool in particular holds a significant amount of opportunities for investors, due to a serious shortage of student beds in the city.
Leaving the South
In contrast, many southern university cities have seen yields forced down in recent years, due to high residential property prices, making them less attractive prospects for investors. The only southern city that appeared in these rankings was Southampton.
Within this city, buy-to-let landlords earn average returns of 5.1%, less than half of those registered in Sunderland. In Southampton, the average house price is £212,900, while average rents are currently £901 per month.
With the British government imposing more taxes on buy-to-let property, it is vital that investors maximise yield, in order to accrue significant profit. Property Partners’ analysis indicates it is key that investors weigh up average house prices vs. average rental values when devising their investment strategy, to ensure they capitalise on the potential of the UK’s student buy-to-let market.