UK Edition
London-based landlords are shunning investment in the capital to buy more lucrative properties in the North.
Around two-thirds of London’s buy-to-let investors who have bought properties this year have done so in other parts of the country.
The North of England has received the greatest boost from the shift as it now accounts for 24pc of all purchases by London landlords.
This is up from just 1pc 10 years ago, as landlords respond to slowing house prices in the capital.
The prospect of cheaper house prices in the North means investors can secure greater profit margins.
Traditionally, investors have favoured expanding their property portfolios close to where they are based.
Aneisha Beveridge, head of research at estate agency Hamptons, said higher taxes on landlords have made the rental market less profitable, meaning they are looking further afield for better deals.
Ms Beveridge said: “That means if you’re going to use a mortgage to fund a buy-to-let you really need to be buying one that has a much higher yield.
“Naturally, that has pushed people further North where those returns are more likely to be available and achievable.”
Rentals in the North East have by far the highest yield of any region at 9.1pc. London has the lowest at 5.6pc.
Ms Bevridge said an investor with £100,000 could buy one, or even several properties, in some parts of the North - which is not the case in the South.
London’s high house prices have been among the most impacted by interest rates rising to a 15-year-high in the past year.
It means despite record rental growth, the capital’s investors are unlikely to see the value of their properties rise due to reduced demand from buyers.
Ms Beveridge said: “We saw London house prices rising quickly up until 2015 and then they have gone into this stagnation period. Up in the North, we’ve seen prices rising more. So investors there have had the best of both worlds over the last seven to eight years.”
Landlords’ bid to branch out of London puts further pressure on rental supply in the capital, while tenants in the North will benefit from greater choice.
Ms Beveridge said investors who are willing to take a greater risk by buying in some of the country’s poorest areas could benefit from the most attractive yields.
She said: “You have got some of the areas in the North East where property prices have barely recovered from their 2008 lows. These are some of the more deprived towns in the country where a very large proportion of locals rent and where consequently high yields and higher investment returns are available.”
She highlighted that County Durham, which is home to Darlington and Hull, has some of the most lucrative areas for buy-to-let investors.