In choosing where to buy investment property, most investors go for places they are familiar with. Usually these are the places they live, somewhere they’ve lived before, or even their former college towns.
There’s nothing wrong in following this thinking pattern, but sometimes it also helps to consult property hot spot lists to know which locations really rake in the profits for every pound you invest.
HSBC recently released their annual list of 50 buy-to-let hot spots in the UK. I decided to take a peek at this annual list, since I was also looking around for a new buy-to-let property.
To determine which locations are perfect for buy-to-let properties, HSBC looked for locations with high rental yields. A yield, as used in their survey, is simply the annual interest or income you can get from your investment. It’s stated as a percentage of the property price. So if the place offers a large supply of affordable properties for sale, then there is a higher yield percentage for that location.
Now, on to the results.
Leading the pack is Manchester with a rental yield of 7.8 per cent. Kingston-upon-hull and Blackpool came in second and third place, with rental yields of 7.81 and 7.35 per cent rental yields, respectively.
The results don’t come as a surprise for me as some reports I’ve previously read already labeled Manchester as “a landlord’s dream.” The city is replete a lot of affordable properties, and there’s a constant stream of demand for rental properties from students and young professionals in the area. Surprised? Don’t be. Manchester is known for having a high student population in Europe, for your information.
House prices in Manchester actually increased from £104,244 in 2014 to £108,870 this year, but the movement was offset by a 4 per cent rent increase from £8,316 last year to £8,628 in 2015.
I’m expecting the demand to even grow further as the Queen’s Speech confirmed that proposals for a new high-speed rail link connecting Manchester and London, called HS2, will push through. The new train will reduce travel time to and from both cities into an hour, instead of two.
Aside from counting down the buy-to-let hotspots, HSBC also determined which among these top locations experienced a leap in rental yields over the year.
Reading and Berkshire shared the pole position as landlords in both areas both experienced a 5.48 per cent jump in their rental yields from the last 12 months. Brighton and Hove, Southampton, Cheltenham in Gloucestershire, Bristol, Bournemouth, Manchester, Oxford and Eastbourne in East Sussex were also recognised in the list as the areas with fastest-rising yields.
If you’re living far away from any of the places mentioned in the list, don’t be discouraged to invest in these areas! Remote investment is always an option, and the tips found in my previous posts will help you through the process.