UK Edition
Buy-to-let investors chasing high rental yields mean the North East is defying the housing downturn afflicting much of Britain, new data shows.
Sales agreed in the first three months of the year were up 7pc compared to the start of 2019 in the North East, making it the strongest performing property market in the country, according to TwentyCi, a data company.
This was a neat mirror image of the 7.5pc average drop recorded across the country as a whole as high mortgage rates and falling real wages hammer buyer demand.
In the South West and East Midlands sales were down by 11.4pc and 15.3pc respectively.
Colin Bradshaw, chief executive of TwentyCi, said the data suggests landlords making new investments are supporting the local market in the North East.
Mr Bradshaw said: “On a like-for-like basis compared to other areas, there is less for-sale stock coming on to the market in the North East. But we are seeing a strong uptick in new rental instructions, which are up 12pc in the North East, versus 6pc nationally.”
The strong performance in the North East cements its status as the buy-to-let investment capital of Britain, with landlords attracted by its low house prices and relatively high rents.
In the year to date, buy-to-let investors made 26pc of all purchases in the North East, according to analysis by Hamptons estate agents. This was the highest rate in the country and more than double the national average of 12pc.
Max Armstrong, director of North East Property Investment, which manages a portfolio of several hundred buy-to-lets, said inquiries from buy-to-let investors have jumped since the start of the year as they look for ways to hedge against inflation.
“Rents are higher than they have ever been and the demand for rental properties up here is crazy,” Mr Armstrong said.
Newcastle was the strongest performing city in the country, with sales up 6.6pc compared to the start of 2019.
Large house-share properties in Newcastle’s student hotspots are selling off-market because demand from investors is so strong, Mr Armstrong added.
The North East is so popular with investors because its low property prices mean it offers the best rental yields in the country. So far this year, rental yields in the North East have averaged 8.4pc before tax, far higher than the average 6.4pc rate, according to Hamptons.
In London and the South East, where rental yields are around 5.5pc, investors made up just one in 10 purchases.
The end of tax relief on buy-to-let mortgages, which came into full effect in 2020 and which has amplified the blow of high mortgage rates on landlords’ profit margins, mean that investors care more than ever about securing higher yields.
Nationally, the sales market has slumped. Exchanges were down 9pc compared to the start of 2019 and there was a 5pc increase in the number of properties with price reductions.
The inner London market was another outlier, with agreed sales up 5.8pc compared to the start of 2019. But the central London market stands out for very different reasons to the North East.
Sales in central London were particularly sluggish before the pandemic began, and the market here fared worst during the pandemic, when workers moved away from city centres and travel restrictions stopped the flow of international buyers.
Now, it is benefitting from the reversal of pandemic trends and an influx of overseas purchasers drawn in by a favourable exchange rate, Mr Bradshaw said.