Landlord News

Landlords Eye the North for Investment as 2018 Comes to a Close

Rose Jinks - December 12, 2018

By Ian Boden, the Sales Director of LendInvest

Investors looking to add to their property portfolios could do far worse than focus on northern cities.

That’s one of the many conclusions that you can draw from the latest edition of the LendInvest Buy-to-Let Index.

It’s difficult to ignore just how well northern cities are delivering for property investors at the moment. Stockport has taken second spot in our index, on the back of impressive capital gains and rental growth, just ahead of Manchester in third place.

The fortunes of these two areas are very much intertwined – it’s precisely because Manchester is thriving to such a degree that growth is being driven in neighbouring postcodes, with Stockport just one example.

This is a pattern we are seeing elsewhere, too. Leeds, for example, is ranked 12th, with Harrogate just down the road also taking a spot inside the top 20. These areas offer investors impressive yields, while the ever-improving transport links between them make them ever more attractive to tenants.

The performance of these northern cities is not going unnoticed, either. A report from IP Global earlier this year pinpointed these northern powerhouse locations as representing some of the top targets for property investors from around the globe, ranking the likes of Manchester and Leeds alongside cities such as Bangkok, Lisbon and Berlin.

The rise of central England

Another region that has enjoyed an eye-catching performance has been central England. Birmingham has figured in the top ten for three consecutive indices now, and its appeal is well recognised by investors.

In this year’s Emerging Trends in Real Estate report from PwC and the Urban Land Institute, which looks at the cities that offer the best prospects for investors, Birmingham is the second highest ranked city in the UK, behind only Manchester.

Landlords Eye the North for Investment as 2018 Comes to a Close

As the report states: “Less dependent upon financial occupiers and foreign capital, these second-tier cities are now reckoned to offer interesting opportunities at better value than ‘over-priced’ London.”

It’s not just Birmingham that is delivering for investors, though when it comes to the Midlands. Wolverhampton has also broken into the top ten, taking seventh spot, just behind Coventry. Both cities have seen significant capital gains of 6.36% and 4.47% respectively.

Peterborough has caught the eye, too, taking eighth place, having performed strongly on yield, capital gains and rental price growth.

Don’t ignore the south

Nonetheless, it is a southern city that regains the top spot this quarter, with Colchester – a consistent presence in the top three – ranking highest. While the rate of capital gains has slowed in Colchester, it is the swift increase in rental price growth that has pushed it to the top, with landlords there seeing rents jump by 6.5%.

It’s worth noting how many other southern cities pop up towards the top end of the index, despite the improving fortunes of northern cities. In the top ten alone we see Canterbury (5th), Enfield (9th) and Luton (10th), alongside Colchester.

Indeed, some of the most impressive rental price increases have been seen in the south. In Enfield, for example, rents have jumped by 4.25%, while Cambridge has seen a 3.86% rise and Romford has enjoyed rent increases of 3.53%.

Pinpointing the areas where rent has room to grow is so crucial for investors, but it’s much easier said than done. The prospects are good though, with the Association of Residential Letting Agents (ARLAPropertymark) reporting in September that, year-on-year, almost a third of tenants (31%) have seen their rents rise, compared to 27% a year ago.

What next for landlords?

This Autumn’s Budget was mercifully short on yet more changes for landlords to get to grips with. The market has undergone quite enough fundamental realignments in recent years, so a little more breathing space is certainly welcome.

Whilst there remains the great unknown of Brexit, the truth is that, even with the improving levels of housebuilding, the demand for rental accommodation will persist.