Investors should look to Northern Powerhouses
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 propert...
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 that 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%.
Stuart Law, CEO at Assetz for Investors, says, ‘The inevitable increases in property prices in London 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 over-priced 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-on-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 Government’s messages about buy-to-let and investing in London generally and look to the North.
‘For people based in the South, investing on your doorstep shouldn’t always be the first option. As prospective homeowners 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.’
|Avg House Price||Annual HPI increase||Median Avg Rent per Week||Market Yield||Assetz Typical Investor Yield||Investment Area|
Leigh WoodsRedland and Cotham
GrantchesterMill Road area