Former Chancellor of the Exchequer, George Osborne, is unlikely to be getting too many Christmas cards from private landlords this year. Reducing the amount of tax relief for higher income tax bracket buy-to-let (BTL) landlords and the 3% surcharge on stamp duty that came into effect this April, squeezed an already pressurised sector.
Pressure on the BTL market remains consistent and unrelenting. In the spring, the Financial Conduct Authority wrote to smaller lenders (those not covered by the Bank of England’s Prudential Regulation Authority) warning that it was about to introduce affordability checks for borrowers based on a stress-test at a base interest rate of 5.5%.
The BTL boom is indeed no longer what it once was, with the Residential Landlords Association claiming that as many as one in five of its members are now actively considering cashing in on their portfolios due to Osborne's changes. However, there is still plenty of profit to be made, especially in the North of England.
The 3 (Surprising) Prospects
The numbers make surprising reading. Withernsea in Hull was shown in a recent Lendinvest survey to offer an average rental yield of 10.7% - more than twice the figure achieved in the exclusive and very expensive Brighton (5.2%), Bournemouth (5.0%) and Bristol (4.6%).
In fact, the current buzz around Hull’s status as the 2017 European City of Culture combined with a notable post-recession resurgence in the area’s commercial profile offers the winning prospect of buying low and enjoying the all-round benefits of a local economic boom - including rising rents and resale value.
Housing developers have seen this trend and are jumping at the opportunities - one notable example being Strata Homes redevelopment of the former Hull City Stadium, Boothferry Park.
Investors within inner-city Sheffield are equally enjoying the benefits of a healthy local economy, well-supplied housing stock and an influx of young pre-purchase professionals. Yields in Sheffield as a whole are assessed at a very profitable 11.57%.
For those looking to invest, it would be wise to do so sooner rather than later, as many foreign investors are taking advantage of the falling value of the pound and snapping up properties across the city.
The final and most surprising area on the list, Bradford is a BTL hotspot. Despite being recently crowned as the worst place to live in the UK, close proximity to Leeds and a strong transport infrastructure (such as Leeds Bradford Airport) makes the city ideal for those looking to live on the cheap in an area currently undergoing major regeneration.
Rental yields in Bradford are as high as 9.02%, a very good return on investment indeed.
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