Which postcode offers the best buy-to-let return?

Thu 14 Jan 2016

To achieve the greatest return on a buy-to-let investment, landlords should look towards the north-west.

That is the conclusion of the latest Buy-to-Let Index by LendInvest, which found Manchester generated the highest yields of any area in the UK. It was closely followed in second place by its regional neighbour Liverpool.

While capital growth and overall return may be dominated by locations in the south of England, investors in the north-west enjoyed the highest yields in the period between 2010 and 2015. Those in Manchester recorded an average annual return of 6.02 per cent, while this figure was 5.16 per cent in Liverpool.

The Greater Manchester town of Oldham also made it into the top five, with a typical yield of 4.98 per cent.

Emma Wells, lettings director at Leaders, says: “Investors can find tremendous value when purchasing a property in many parts of the north-west. This, combined with high tenant demand, makes the area an ideal place to achieve a healthy yield.

“Looking for a cheaper property in the north that is likely to be popular with tenants - perhaps due to a favourable location or proximity to key transport links - can be a shrewd move. It reduces the initial financial commitment and, as the LendInvest study shows, a sizeable and reliable return can be enjoyed.”

The yields recorded in Manchester and Liverpool were some way ahead of those in London, where they were calculated as being 4.86 per cent in outer London and 4.71 per cent in the city.

However, yield is just one factor for investors to consider. Landlords will often be just as interested in capital growth - an area in which London performed strongly with average annual house prices increasing by 7.81 per cent in the city and 4.59 per cent in outer areas.

In some towns and cities, capital appreciation could be the most lucrative aspect of buying-to-let, so picking an area with potential for prices to rise is important. Between 2010 and 2015, other locations in which annual capital growth rates were high included Cambridge (5.99 per cent), Watford (5.35 per cent), Oxford (3.9 per cent), St Albans (3.84 per cent) and Milton Keynes (3.83 per cent).

For advice you can trust on all aspects of investing in property, please contact your local Leaders branch.