London is Dead for Buy-to-Let, but Manchester and Liverpool Stand Strong

Rumours may have been circulating over the profitability of investing in London property for some time, but one expert is now insisting that the capital is dead for buy-to-let, with Manchester and Liverpool standing strong.

Jonathan Stephens, the Managing Director of property investment firm Surrenden Invest, has spoken out in response to a range of new statistics released over the past week.

Firstly, estate agent Cushman & Wakefield has reported that homeowners in Manchester have seen the value of their properties surge by 34% in the three years to July 2017, while those in Salford have witnessed growth of 38% over the same period. The national average is 30%.

Cushman & Wakefield’s findings are supported by the results of property portal Zoopla’s latest Sentiment Survey, which found that more than eight in ten homeowners (84%) expect property values to increase in their area, up by 14% since the survey was last taken in November 2017.

Surrenden Invest’s new Westminster Works apartments in Birmingham

Zoopla also suggests that homeowners believe that the value of their properties will rise by a significant 6.9% over the next six months, which is the largest increase in consumer confidence since the first half of 2016.

Despite higher property prices, Greater Manchester remains an attractive investment proposition to landlords, with increasingly strong rental yields leading to annual returns of between 11-20%.

The average annual rental yield in both Manchester and Salford, according to Cushman & Wakefield, is currently 5.3%.

Julian Cotton, the Associate Director of the firm, says: “Manchester benefits from a particularly active investor market, with more than 52% of the entire housing stock lying in the private rented sector.

“Considering the historically high rates of house price inflation in both Salford and Manchester, initial rental yields remain strong at present prices. This resilience is a clear indication of underlying strong tenant demand, as rates of rental inflation come near to keeping pace with house price growth.”

At the same time, Liverpool has been named as offering some of the most profitable postcodes for buy-to-let in the UK.

Stephens explains: “The key hotspots for sales activity are without a doubt the UK’s regional cities: investors are doing their research and looking at Birmingham, Manchester and Liverpool in particular – and even further north to Newcastle.”

He believes: “The London market is really stagnant, and many investors are voting with their feet (or rather, their wallets) and passing over it altogether. There are still deals to be done there for those buying at big discounts, but the market is over-hyped following a huge over-supply of new build stock. The ongoing standoff between developers and private sellers means that it’s likely to remain stagnant until we see a price correction. Add to that the fact that there’s little, if any, prospect of meaningful capital growth in London, and that yields there have been notoriously low for years now, and it’s easy to see why regional cities are coming to the fore.

“Five years ago, investors were incredibly skeptical about any UK property investment outside of London. Now, they’re coming to us having already chosen a regional city. Investors are incredibly well informed, and thus most have no intention of buying in London. Instead, they are looking at yields of 5-6% net in cities like Manchester, Liverpool and Birmingham, along with the prospect of capital growth in the region of 5-10% year-on-year. The rental market is growing in these cities too. Manchester, for example, has seen rental market growth of 4% over the past year. This is all underpinned by significant economic growth in the UK’s regional cities.”

Landlords, what is your sentiment regarding investment hotspots across the UK? And is London really dead for buy-to-let?