New research by Property Partner has revealed a striking North-South divide in the UK buy-to-let market.
The 10 most efficient areas to become a landlord in Britain are in the North, while every one of the least efficient buy-to-let locations are in the South.
Stoke-on-Trent is the UK’s buy-to-let sweet spot, offering landlords the best combination of affordability and rental return.
Oldham was in second place with Liverpool in third.
Property Partner’s study ranked Britain’s 100 major towns and cities, taking into account the average income, average property price and average rent in each area.
The rest of the top 10 was made up of Leeds, Middlesbrough, Newcastle, Stockton-on-Tees, Gateshead, Rotherham and Rochdale.
Potential landlords in Poole face the most challenging investment in buy-to-let followed by Central London, and then Sevenoaks. Fourth from bottom came Bournemouth, followed by Cambridge, Oxford, Winchester, St Albans, Chelmsford and Brighton.
For income seeking buy-to-let investors, the research reveals a telling correlation between low rental yield and investment inefficiency.
Leeds had the highest yield of all 100 towns and cities (6.92%) and came in fourth overall. Four other places featured in both the top ten yielding towns/cities and the ten best places to become a landlord overall. They were Gateshead (yielding 5.78%), Stoke-on-Trent (5.67%), Rochdale (5.6%) and Newcastle (5.59%).
The same pattern exists at the other end of the table. Six of the most challenging areas to profit from buy-to-let are also among the 10 lowest yielding areas. They are Poole (1.94%), Sevenoaks (2.48%), Cambridge (2.51%), Chelmsford (2.53%), St Albans (2.55%) and Bournemouth (2.68%), all markets with high demand from owner occupiers prepared to pay premium prices for a popular location.
An investor would need a deposit of £29,397 to secure the average buy-to-let purchase in top performer Stoke-on-Trent on a Loan-To-Value (LTV) of 75%. Average property prices there have reached just £117,586.
Dan Gandesha, founder of property investment marketplace Property Partner, said: “What our research reveals is a clear North-South divide in the investment opportunities facing buy-to-let landlords.
“We have always been at pains to point out to investors that prime locations such as Kensington and Chelsea can offer some of the lowest yields available, because prices have raced ahead while rents have failed to keep pace.
“It just goes to show, you shouldn’t always follow the crowd and the right investment could be on your doorstep where there is far less overall demand.”
UK’s top ten buy-to-let sweet spots
| Town/City | Average annual income | Average property price | Average rent per year | House price/earnings | Annual rental yield | Yield (house price/earnings) score |
| Stoke-on-Trent | £26,250 | £117,586 | £6,672.00 | 4.48 | 5.67% | 1.27% |
| Oldham | £28,361 | £125,307 | £6,840.00 | 4.42 | 5.46% | 1.24% |
| Liverpool | £29,500 | £162,373 | £9,672.00 | 5.50 | 5.96% | 1.08% |
| Leeds | £31,860 | £206,544 | £14,292.00 | 6.48 | 6.92% | 1.07% |
| Middlesbrough | £27,810 | £130,798 | £6,540.00 | 4.70 | 5.00% | 1.06% |
| Newcastle-upon-Tyne | £31,788 | £170,892 | £9,552.00 | 5.38 | 5.59% | 1.04% |
| Stockton-on-Tees | £30,134 | £141,807 | £6,816.00 | 4.71 | 4.81% | 1.02% |
| Gateshead | £29,011 | £168,644 | £9,756.00 | 5.81 | 5.78% | 1.00% |
| Rotherham | £29,276 | £130,867 | £5,640.00 | 4.47 | 4.31% | 0.96% |
| Rochdale | £28,397 | £165,110 | £9,252.00 | 5.81 | 5.60% | 0.96% |
*Source ONS income data for 2016 and Home.co.uk rental and property prices (collated 17/05/17)
UK’s 10 buy-to-let not-spots
| Town/City | Average annual income | Average property price | Average rent per year | House price/earnings | Annual rental yield | Yield (house price/earnings) score |
| Poole | £31,533 | £762,532 | £14,808.00 | 24.18 | 1.94% | 0.08% |
| Central London | £40,310 | £1,052,394 | £33,132.00 | 26.11 | 3.15% | 0.12% |
| Sevenoaks | £40,316 | £764,574 | £18,936.00 | 18.96 | 2.48% | 0.13% |
| Bournemouth | £30,243 | £524,945 | £14,076.00 | 17.36 | 2.68% | 0.15% |
| Cambridge | £35,760 | £581,344 | £14,616.00 | 16.26 | 2.51% | 0.15% |
| Oxford | £35,090 | £634,051 | £23,640.00 | 18.07 | 3.73% | 0.21% |
| Winchester | £42,682 | £595,090 | £17,148.00 | 13.94 | 2.88% | 0.21% |
| St Albans | £52,759 | £620,092 | £15,828.00 | 11.75 | 2.55% | 0.22% |
| Chelmsford | £38,730 | £444,198 | £11,256.00 | 11.47 | 2.53% | 0.22% |
| Brighton | £33,774 | £509,747 | £17,640.00 | 15.09 | 3.46% | 0.23% |
*Source ONS income data for 2016 and Home.co.uk rental and property prices (collated 17/05/17)
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