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The top locations to recoup your buy-to-let investment costs – property price and Stamp Duty charges – based solely on annual rental returns have been revealed by new research.

The study, commissioned by Benham and Reeves estate agent, found that Scotland is the fastest location to recoup your buy-to-let investment costs in the UK, for both property price and Stamp Duty charges, based solely on its average annual rental return, with the annual rent repaying costs in 17.7 years.

Northern Ireland was the second fastest, at an average of 18.9 years, followed by England, at 25 years, and Wales, at 26.4 years.

With Scotland and Northern Ireland home to the quickest returns on country level, it is no surprise that they account for the top three fastest areas to recoup your buy-to-let investment costs in the UK, with Glasgow coming out on top, at 13.3 years, followed by Belfast (15.8) and Aberdeen (17.8).

Nottingham was the fastest area in England to see rental income recoup the cost of investing in property, at an average of 18.4 years, with Newcastle close behind (18.5).

In London, Tower Hamlets was the best place to invest in buy-to-let for a fast return, with the annual rental income taking 21.4 years on average to recoup the typical buy-to-let investment costs of £452,821.

Barking and Dagenham (22 years), Newham (23), Greenwich (23.5) and Enfield (25.7) were also among some of the best options in the capital.

Marc von Grundherr, the Director of Benham and Reeves, comments on the research: “Buy-to-let investment is a complicated business, even more so given the changes to the sector of late, however, the primary indicator of a good investment is always going to be the rental yield available. 

“While a buy-to-let investment includes all sorts of additional concerns, such as contingency budgets, capital growth and so on, we wanted to highlight on a more digestible level where offers a good investment option when it comes to recouping the cost of that investment via your rental income.”

He advises: “What this research demonstrates is that, while buy-to-let remains a lucrative business, despite the Government’s attempts, it should be viewed as a long-term one and not a method for making a quick buck. For those serious about the sector, whether it be as a professional or amateur landlord, it’s important to understand the commitment before diving in, if you wish to see a profit.”

Is Luton the best buy-to-let hotspot for property investors? Specialist property investment agency Surrenden Invest certainly thinks so!

With prices correcting over the past two years, London has definitely not been the best location when it comes to buy-to-let investment. 

However, Surrenden Invest believes that the capital’s fortunes are on the turn, making it an ideal time to consider commuter belt properties in areas of pent-up housing demand, such as Luton.

Jonathan Stephens, the Managing Director of Surrenden Invest, explains the town’s appeal: “Life in Luton means easy access to the best that London has to offer, but without the capital’s extortionate housing costs. The town has excellent amenities, with a lively local culture that appeals to those looking to balance access to London with a realistic lifestyle. This is one of the reasons that Luton exhibits such excellent growth potential.”

According to estate agent Savills, London will lead the UK’s compound rent price increase over the five years to 2023, with growth of 0.5% this yearaccelerating to 1.5% in 2020, 4.0% in 2021 and 4.5% in the following two years. This overall growth rate of 15.9% compares to a rise across the rest of the UK (excluding the capital) of just 11.5%. This is certainly good news for those looking at investing in residential property in and around London.

Luton is a growing town that is known for being one of the capital’s most sought-after commuter spots. Indeed, estate agent Jackson-Stops has flagged it as the top commuter hotspot for 2019.

Luton is located 30 miles northwest of central London. Direct trains run into London St. Pancras in as little as 22 minutes. 167 trains per day provide an almost round-the-clock service. Rents, meanwhile, are around a third of the cost that they are in the capital. For tenants, it’s the ideal combination.

Luton’s popularity is, as a result, increasing rapidly. Between 2018-41, the Office for National Statistics expects the town’s population to grow by 12.9%, to 248,500. At the same time, it is in the grips of a serious housing shortage, as is the case in many towns and cities in the UK.

However, Luton’s housing shortage is more acute than most, with developer Project Etopia expecting that it will be 22.1 years behind where in needs to be in terms of housebuilding by 2026, if the current rate of development continues. At present, Luton is building 430 new homes a year – it needs to build 1,417 to meet demand.

The town’s housing shortage spells good news for buy-to-let investors over the long-term, as it points to a sustained level of tenant demand, as renters snap up the homes that are available. It also has the potential to drive up house prices, as well as rents and yields. Luton is already bucking the trend in terms of house price growth.

While many southern locations are seeing a market correction at present, with falling prices or flat growth, Luton’s average property value rose by 1.6% in the year to April. Savills, meanwhile, projects growth of 9.3% in the five years to 2023 for the wider South East region.

In terms of its rental market, Luton enjoys an average rent price of £632 per month for a one-bedroom apartment and £828 for a two-bed, according to Zoopla. This is significantly less than equivalent homes in London.

Stephens adds: “It is Luton’s combination of capital growth potential and pent-up demand for private rented sector homes that has caused the town to top LendInvest’s UK buy-to-let index for so much of the past three or four-year period. This is a town with outstanding growth potential.”