Market News
Unfashionable towns best for buy-to-let
04/03/2010
Buy-to-let investors looking for the best returns should look outside trendy hotspots, with many less fashionable areas delivering far better returns, a study shows.
A report into the Top 100 towns for buy-to-let yields, compiled by property listing website FindaProperty.com for This is Money, shows that Blackpool is the postcode delivering the best returns in the UK.
The Holy Grail for property investors is a combination of low average property prices compared to rental returns and the report shows that locations not typically considered property hotspots make up a sizeable chunk of the top 25 postcodes.
Investors in property in Blackpool are looking at an average home asking price of £161,722 and monthly rent of £720, according to FindaProperty.com, delivering a gross yield of 5.34%.
This represents a far more accessible investment than the next best postcode, which covers Kingston on Thames, where the average house price is £420,469.
While the top 20 is peppered with more fashionable locations, including Kingston, east London, Manchester, Central London and Twickenham, it is the more run of the mill locations that stand out.
Blackpool is joined by Kirkcaldy, Romford, Sunderland, Wigan, Blackburn, Bolton, Luton and Cleveland, all of which offer yields above 4%, but a far lower cost of purchasing a property.
FindaProperty.com calculated the gross yield by taking a property's rent over 12 months as a percentage of its purchase price.
Noticeably, while all the postcodes delivered far greater yields than the return on the average savings account of around 1.5%, none managed to breach the 6% mark that attracted investors in the early days of the buy-to-let boom
Once mortgage costs, letting fees, maintenance costs and tax are factored in, returns on the buy-to-let investments would be much lower.
Nigel Lewis, of FindaProperty.com, said: “This shows that the best places for high gross yield are those with lower housing costs, a changing population and in particular if they have one or more universities.'
'London is strong because it's under population pressure and has multiple universities and therefore even satellite areas such as Twickenham do well.
'The other places where gross yields tend to be high are where there is a large inbound ethnic population getting on its economic feet and rental demand is high but house prices usually lower than the average.'