Where are the most vulnerable landlords in the UK?

Warren Lewis
8th August 2018
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Tax changes including the second home surcharge and tapering of mortgage interest relief have constrained the buy-to-let market in recent years, resulting in an environment where yield alone can no longer be the primary consideration.

According to new research by Gatehouse Bank, the most vulnerable rental market in the UK is Winchester, offering landlords the hardest won gains followed by Cambridge, Chichester, Warwick and Reading.

The study takes into account the second tier of economic indicators including how long available rentals have been on the market, as well as the affordability ratio between average salaries and rents.

This is in contrast to studies that look solely at yield, which would currently identify Padstow, Bedford, Taunton, Shrewsbury and Salisbury as making up the least attractive buy-to-let hunting grounds. The Gatehouse Bank study, across 122 UK towns and cities, found these locations rank well above the bottom, placing 49th, 100th, 95th, 40th and 78th respectively.

Meanwhile, the North and Midlands dominated the listings of the places where landlords are least vulnerable. Bootle in Merseyside emerged as the best place to offer rental property followed by Inverness, Stoke-on-Trent, Barnsley and St Helens.

In worst placed Winchester, properties for rent have been sitting on the market for almost a third longer (248 days) than in favourable Bootle (183 days), where the average yield was 5.6% compared with Winchester’s 3.1%.

Of the UK’s major cities, Manchester ranked 34th, Birmingham lay in 75th position, with Glasgow ranked 43rd. London - where high property prices famously shrink yields and deter landlords - ranked 89th.

It won’t surprise renters in Edinburgh and London that they pay the highest rents compared to earnings. These cities came bottom (121st and 122nd) when ranking this indicator, with rents coming in at 73% and 92% of local average earnings respectively. Meanwhile Oxford (70.8%), Guildford (69.3%) and Brighton (66.6%) all fell into the bottom five.

In contrast, the top three cities for affordability, all of which are based in the North of England, boast earnings-to-rent ratios that are three times less. Renters in Hartlepool, Darlington and Stockton-on-Tees make up the top three. Tenants in these areas can expect rents that are 17.5%, 19.6% and 19.9% of earnings respectively.

Overall, the study found properties available to rent across the UK have been sitting on the market for 197 days on average. Meanwhile the typical yield is 4.6% and the average proportion of earnings to rent is 37%.

Charles Haresnape, CEO at Gatehouse Bank, which offers buy to let finance for landlords, commented: “What our research shows is that famous Northern hospitality is not a myth. It’s a great place not only to be a landlord but also to live, with cities in the North and the Midlands performing much better across all indicators.

Rental properties are let far quicker than in the South, which is no surprise when major cities like Liverpool and Manchester are within commuting distance of smaller towns like Bootle.

What’s really striking is that in the areas that performed best, rental rates were far more affordable and this correlation underscores the symbiotic relationship between renters and landlords in areas where their investments could be deemed safest.”

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