A buy to let index of returns compiled by a financial firm shows the greatest returns for investors are now to be found well beyond London and the south east of England.
Taking into account stamp duty bills after recent tax changes, alongside average house prices and average rental yields, the index from LendInvest looks at what investors can buy across the country for £250,000, £500,000, £750,000 and £1m.
In all price brackets, rental properties in Inner and Outer London offered consistently less attractive investment opportunities to those in other parts of the country when price, yield and stamp duty tax were considered equally.
Buying multiple properties - particularly in the north east and north west of England - would often generate the same or better rental yields, while demanding as much as 50 per cent less stamp duty than just one property in Inner London costing the same.
LendInvest gives examples, stating that for £250,000, investors could buy a single studio flat in south east London or two three-bed properties in Durham - the latter option giving a 200 per cent higher rental yield and a 30 per cent lower stamp duty bill.
It also says that spending £500,000 in Bradford would secure a landlord five two-bed properties with an average rental yield 40 per cent higher than a typical one-bed flat costing the same in west London, while paying almost 50 per cent less stamp duty.
Ten studios in Sunderland cost less than one three bed house in north west London - £750,000 - while earning a 28 per cent higher average annual yield and demanding 55 per cent less stamp duty.
“The current market is creating a huge opportunity for ‘cross-country landlords’ who live in one city, but rent out houses in other cities across the UK. Cities like Brighton and Southampton are becoming more popular with commuters thanks to the transport links into London, and developments like HS2 will prove an additional boost to areas in the Midlands and beyond” says Christian Faes, chief executive of LendInvest.
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We have been advising our clients of this for the past 3 years. It has been obvious to us that due to Stamp duty, Taxation, Cost of running etc etc. Buying multiple units outside the South rather than one property in say the likes of London will yield far greater returns over the long run. There is more propensity for Capital growth in the long run as well, as these Cities in the North start to grow.
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