London’s landlords head North for higher returns

London’s buy to let investors are turning their backs on the capital and looking for opportunities in the North of England, the Telegraph reports.

According to estate agency Hamptons, two-thirds of London landlords who bought properties this year did so outside the capital, compared to just one-third 10 years ago.

The North of England has been the main beneficiary of this trend, attracting 24% of all purchases by London landlords this year, up from 1% a decade ago.

The reasons behind this shift are higher taxes and slowing house price growth in London, which has reduced the potential for capital gains for investors.

Meanwhile, the North offers cheaper properties with higher rental yields, meaning landlords can make more money from their tenants.

‘Use a mortgage to fund a buy to let’

Aneisha Beveridge, head of research at Hamptons, said: “That means if you’re going to use a mortgage to fund a buy to let you really need to be buying one that has a much higher yield.

“Naturally, that has pushed people further North where those returns are more likely to be available and achievable.”

The average rental yield in the North East is 9.1%, the highest in the country, while London has the lowest at 5.6%.

This means that an investor with £100,000 could buy a property in some parts of the North and earn more rent than in the South.

House prices have been hit

London’s house prices have also been hit by rising interest rates, which have reached a 15-year-high in the past year to dampen buyer demand and make mortgages more expensive.

As a result, London’s landlords have seen little or no growth in their property values since 2015.

However, house prices in the North have been rising steadily over the last seven to eight years, giving investors the best of both worlds: higher rents and higher capital gains.

Ms Beveridge told the newspaper: “We saw London house prices rising quickly up until 2015 and then they have gone into this stagnation period.

“In the North, we’ve seen prices rising more. So, investors there have had the best of both worlds over the last seven to eight years.”

Migration of London landlords to the North

The migration of London landlords to the North has implications for both rental markets as it means less supply and more competition for tenants in the capital.

While in the North, it means more choice and better quality for renters.

Ms Beveridge said: “You have got some of the areas in the North East where property prices have barely recovered from their 2008 lows.

“These are some of the more deprived towns in the country where a very large proportion of local people rent and where consequently high yields and higher investment returns are available.”

She points to County Durham as an example of a region where buy to let investors can find attractive deals.

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