08 Jun 2020

Many landlords and investors may now be looking to expand their portfolios, with lockdown restrictions gradually being eased and major lenders such as Barclays, Accord Mortgages and Skipton International cutting rates and raising their lending ceilings.

But where’s the best place in the UK to invest in at the moment?

Mojo Mortgages analysed data from the Land Registry, Zoopla, OnTheMarket and property data portal PropertyData.co.uk to find out where the current hotspots are, and also the areas that don’t generate profitable yields.

There are an estimated 2.6 million buy-to-let landlords in the UK and, despite the pandemic, Mojo Mortgages says those who do have the funds to invest believe investment opportunities will emerge, with lenders cutting rates on buy-to-let products and raising affordability thresholds.

The free online mortgage broker also says there’s market sentiment which is leaning towards limiting competition from other buyers and even pushing up demand for rental property.

The top 20 buy-to-let areas – where are they?

Postcodes in the top 20 are all generating some good returns, with the highest being Liverpool, where landlords can enjoy yields of up to 10%. Bradford, Sunderland and Middlesbrough follow with yields of 10, 9 and 8% respectively.

Liverpool and Sunderland are popular university cities and the consistent flow of potential tenants puts landlords in a good position, even if this might now be temporarily disrupted by universities operating remotely for the foreseeable.

Even postcodes towards the bottom of the top 20, such as those in Aberdeen and Glasgow, are returning healthy yields of 7%.

PostcodeTownRegionProperties for rentAverage yieldProperties for saleAverage price
L7LiverpoolNorth West9810.30%59£95,000
BD1BradfordNorth West8910.00%63£57,000
SR1SunderlandNorth East909.40%67£61,000
TS1MiddlesbroughNorth East1178.80%93£56,000
LS4Burley, LeedsWest Yorkshire1248.60%16£169,000
L6LiverpoolNorth West848.40%51£97,000
L1LiverpoolNorth West728.10%191£104,000
NE6Newcastle-Upon-TyneNorth East2897.80%123£128,000
M14ManchesterNorth West2627.60%12£177,000
L15Wavertree, LiverpoolNorth West957.40%78£138,000
L2LiverpoolNorth West407.40%123£127,000
S1SheffieldSouth Yorkshire977.20%86£112,000
CH41BirkenheadNorth West387.10%98£84,000

Liverpool, Bradford and Sunderland out in front

Liverpool’s L7 postcode tops the buy-to-let yield table, generating yields of 10.30% from an average asking price of only £95,000.

The L7 postcode covers the area of Edge Hill and is in close proximity to Liverpool’s city centre. Five more Liverpool postcodes feature in the top 20, with returns ranging from 7.40% to 10.30%.

In second-placed Bradford, meanwhile, the BD1 postcode returns a rental yield of 10%, and the average asking price stands at only £57,000.

The BD1 postcode covers the main town centre of Bradford, offering commuters easy access to bigger cities such as Leeds.

Over in the North East, Sunderland – which has recently generated worldwide attention thanks to its football club’s starring role in Netflix hit ‘Sunderland Till I Die’ – is generating rental yields of 9.40% for landlords, with a solid student population helping to prop this percentage up.

The average asking price of a property in Sunderland is only £61,000, which means yields are far less squeezed.

The North West named as the best region

The North West is one of the top regions for strong buy-to-let yields, according to Mojo Mortgages’ analysis.

In addition to a number of profitable areas in Liverpool, the postcode area of M14 in Manchester -which covers Fallowfield – offers yields of 7.60%. Both these cities have a solid student population, plus property prices are relatively low.

The 10 worst buy-to-let postcodes

PostcodeTownRegionProperties for rentAverage yieldProperties for saleAverage price
SW3Kensington and ChelseaLondon1452.11121,612,797
RH20HorshamSouth East292.1158547,781
W8Kensington and ChelseaLondon17221081,891,603
HR9HerefordWest Midlands212134353,758
RG10WokinghamSouth East422113611,725
B95Stratford-upon-AvonWest Midlands362114575,190
WC2Westminster, Islington, CamdenLondon12921011,671,087
HP9ChilternSouth East461.81091,071,041
SW7Kensington and ChelseaLondon2311.71252,097,726
W1City of LondonLondon1571.4682,388,107

London and the South East perform the worst

By contrast, the capital, the South East and the West Midlands perform much less strongly when it comes to rental yields, with incredibly high average asking prices in many cases.

Properties in the City of London and its surrounding boroughs generate the lowest yields in the UK, with average prices to buy above the £1 million mark.

The South East also features prominently in the top 10 worst buy-to-let list, more than likely due to areas such as Wokingham, Chiltern and Horsham being commuter hotspots, rather than areas to rent in.

Stratford-upon-Avon – the birthplace of Shakespeare – also features in the bottom 10 with an average yield of 2% and asking average prices at just over half a million.

Top 10 London buy-to-let areas

PostcodeTownProperties for rentAverage yieldProperties for saleAverage priceAverage asking rent (pm)
RM9Dagenham, Becontree395.377314,1291,380
RM8Dagenham, Becontree Heath295.246317,5331,388
E12Manor Park, Little Ilford, Aldersbrook194.839380,5541,509
E6East Ham, Beckton, Upton Park, Barking354.785384,4981,497
E13Plaistow, West Ham, Upton Park394.777378,6121,486
RM13Rainham, South Hornchurch, Wennington174.682366,9441,412
RM6Chadwell Heath, Little Heath334.654346,4581,335

Despite the capital having the worst yields of anywhere in the country, London does still have many pockets where rental yields are much stronger. London’s rental market is huge and there is always a very large demand for rental properties in the capital. Tenants have a much wider variety of properties to choose from.

IG11 in the London Borough of Barking offers the best rental yield and average asking prices of £289,374. Dagenham features three times in the top 10, with areas such as Becontree and Becontree Heath also generating yields of more than 5%. Houses prices in these areas tend to be much more affordable.

The London Borough of Ealing only featured once in the top 10 with Northolt generating an average yield of 5%.

The 10 worst London buy-to-let areas

PostcodeTownProperties for rentAverage yieldProperties for saleAverage priceAverage asking rent (pm)
SW14Mortlake, East Sheen282.570994,0282,030
SW5Earl’s Court2402.41421,076,9462,187
EC2East Central London1772.41401,325,9332,705
N6Highgate, Hampstead Heath792.298865,9981,614
SW3Chelsea, Brompton, Knightsbridge1452.11121,612,7972,868
SW1Central London2692.11951,529,5592,666
W8Kensington, Holland Park17221081,891,6033,119
WC2Central London12921011,671,0872,811
SW7South Kensington, Knightsbridge2311.71252,097,7262,981
W1Central London1571.4682,388,1072,807

High property prices in London mean that a buy-to-let property in the area must work hard to return a profit. In some areas of the city, that can prove to be very difficult.

The postcode of W1 in Central London generates the worst yield at 1.4%, with the average asking price of a property around £2.3 million, whilst the average asking rent is a massive £2,807 per month.

The average salary in London equates to £37,000 annually, and £2,300 monthly, making it unaffordable for many sole renters to go it alone.

The best of the ‘worst’ is in Hampstead Heath, N6, where the average asking price is lower than in other areas of the worst 10, at £865,000, and average asking rent is £1,614, making the buy-to-let yield 2.2%.

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