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Rental yields strong outside London despite buy-to-let slow down

Friday 15 April 2016

New figures show signs that the BTL market is slowing down as potential investors are deterred by George Osborne’s stamp duty increase. 

According to property website Rightmove, interest from would-be BTL investors fell by over a quarter (27 per cent) in March compared to the same time in 2015. 

The data from last month compares sharply with the figures from the three months previous as enquiries from investors surged by 24 per cent year on year. 

The Chancellor’s controversial 3 per cent surcharge on stamp duty for BTL properties and second homes kicked in at the beginning of this month. 

Are buy-to-let investors biding their time?

Experts like Sam Mitchell, Rightmove’s head of lettings, are not yet sure whether this dip represents a ‘short term pause’ or a more prolonged downward trend in the BTL market. 

He speculates that some investors could be biding their time and waiting for the full implications of the tax changes to become clear before they make any decisions about purchasing new properties. 

And he believes this hiatus could be good news for first time buyers who have a deposit, as it subtracts some of the competition posed by landlords on the lookout for small properties. 

Although the new surcharge may have dampened the rental market to some extent, landlords still have plenty of cause for optimism. 

Rental yields in the north are strong 

The prospects for BTL investors outside London are, in particular, by no means bleak. 

Rental yields in areas like Durham and Merseyside could present real opportunities in the year ahead. 

Peterlee in Durham has the highest rental yield at 9.1 per cent, with Bootle and Birkenhead in Merseyside at 8.6 per cent and 7.8 per cent respectively, and Stanley, again in Durham, at 7.7 per cent. Accrington in Lancashire has the next highest yield at 7.3 per cent. 

And with two-bed properties available for as little as £60,000 in these areas, Rightmove recommends that investors talk to local estate agents to get an idea of what demand from tenants is like locally. 

Although demand from tenants may be highest in the South and the East of England, the figures for January to March show demand is also growing in the Manchester area, with locations like Ashton-Under-Lyne and Stalybridge worth considering in the coming months. 

Predictably, the greatest increase in rents year on year over the last three months was in London where rental costs rose by 1.3 per cent and the average monthly rent is now £2,021.

Rents rose by 1.1 per cent in the North West and 0.9 per cent in the East Midlands, in the past quarter, but fell  by 0.1 per cent in the South East and East of England.

The number of landlords in the UK is on the rise too, as figures from the Office for National Statistics last week showed the number of households which receive income from rented properties as tripled in the last 30 years to 6 per cent. 

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