The only way is up: BTL investors should head North

The only way is up: BTL investors should head North

According to Assetz for Investors, buy-to-let investors should head north to see better returns as London loses its appeal.

The Conservative government has made it clear that buy-to-let investors are no longer welcome in London. The implementation of a 3% additional stamp duty levy on second homes and investment property combined with property prices in the Capital being at an all-time high are big deterrents.

The introduction of the new Help-to-Buy equity loan in London which offers a 40% interest free loan up to £600,000 from early 2016 will inevitably add further upward price pressure in this already-overheated location as first time buyers begin to have the upper hand.

So where does Buy-to-Let still pay dividends, how do you mitigate the latest tax on Buy-to-Let mortgage interest and the new 3% stamp duty and which areas offer the best opportunities for realising a good return on investment? Assetz for Investors advises landlords to look North where lower acquisition prices, better potential for capital growth and higher yields can all be found.

With the Northern Powerhouse set to benefit from a variety of new infrastructure projects and greater prominence and investment over the coming years, Assetz for Investors has identified a number of hotspots and key areas which provide better opportunities for investors than many of the South’s traditionally popular locations.

As the table below illustrates, the best yields can be found in Manchester, Liverpool and Leeds with each offering market yields above 6%. Investors purchasing through Assetz for Investors however can expect yields of closer to 8% in these areas through their range of exclusively sourced investment properties. 


Stuart Law, CEO at Assetz for Investors, comments: “The inevitable increases in property prices in the Capital following the foolish 40% regional Help-to-Buy policy means many home owners will be pushed into negative equity when the unavoidable price reversal takes hold. Buy-to-Let investors have an easier choice of where to invest and should look further afield.

The impact of the new tax on mortgage interest is very pronounced in the overpriced South. An investor with £200,000 to invest in the capital would need a £400,000 mortgage to buy a typical £600,000 property. If the gross yield was a typical 4% and the mortgage interest rate was 4% and the investor was a higher rate tax payer, they would actually have to pay £4,400 per annum to own the property and live in hope of further price growth to avoid losing money year after year.
 
If the same investor bought two £100,000 properties in the North for cash at a typical 7% gross yield then the investor would receive £9,100 per annum on their cash, before tax, and still benefit from full house price growth in that location.
 
For investors seeking income rather than speculators hoping for house price growth perhaps now is the time to heed the Governments messages about Buy-to-Let and investing in London generally and look to the North.

“For people based in the South investing on your door-step should not be the first option. As prospective home owners are increasingly priced out of the Capital more people based in the South will be heading from here to build their livelihoods in the emerging Northern Powerhouse. The balance of power is now starting to lean towards the North.”

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Latest Comments

MBM Homelets
MBM Homelets 23 Mar 2017

Although this is a very positive step, there is little or no guarantee of the standard of workmanship employed by the tenants. We have had experience of a professionally decorated property being ' painted'...

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ajay
ajay 21 Mar 2017

How is the "robust evidence" looking now?

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NathanG
NathanG 20 Mar 2017

I've been watching the series so far and am completely baffled by the cases that were presented. Though, I don't think that we can protect ourselves from every scam possible - it will just make the scammers...

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Landlady14
Landlady14 01 Mar 2017

You would think so Niraj Shah! My experience only proves that there are varying qualitiers of professional in all aspects of property letting. None of the ones I have dealt with, from letting agents to...

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Mark
Mark 01 Mar 2017

Thanks for this article. Hopefully one day everybody's lifestyle will be eco-sustainable.

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Ben Taylor
Ben Taylor 28 Feb 2017

I was convinced that London was the most expensive!

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Alan Read
Alan Read 28 Feb 2017

Australia are leading the way in this I think. The trouble with Britain is we don't get enough sun to make use of solar power.

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James Powell
James Powell 27 Feb 2017

This is a very good news.

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DanHumphreys
DanHumphreys 27 Feb 2017

It sounds like a good idea. Anything to help the younger generation get a foothold.

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Matt
Matt 20 Feb 2017

Is this fake news?

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Matthew Hollywood
Matthew Hollywood 07 Feb 2017

Matthew Hollywood - Director Mishon Mackay Land & New Homes - Brighton The shortage of New Homes is in part effected by the lack of land sales. Land sales are held back because there is a disparity between...

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CommercialTrust
CommercialTrust 30 Jan 2017

Hi Graham, Would be interesting to see the above figure calculated against an investment via a Lt Company /SPV structure and if the investor found themselves pushed in to the higher tax bracket. Mortgage...

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