Buy to let: Seaside towns offer best returns

Posted on April 22nd, 2013 | Categories - News

iStock_000008970391XSmallSea side landlords are receiving table topping rental yields, according to recent research from HSBC.

Investors in Southampton, Blackpool and Kingston-upon-Hull are currently achieving returns of almost 8% on their buy to let properties, the highest in the country according to HSBC. Experts believe the yields in some sea side towns are driven up by relatively low house prices and the potential to let the property to holidaymakers.

However, it isn’t just seaside towns which are achieving good yields. The research found buy-to-let properties in Manchester, Nottingham and Slough are also doing well, with yields of 7.60%, 7.55% and 6.82% respectively.

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Many towns and cities which provide an attractive rental yields share similar characteristics, with affordable property prices and relatively high rents, driven by low rates of unemployment, the quality of schooling and local universities.

Peter Dockar, Head of Mortgages at HSBC, said: “Buy to let remains a good investment for those looking for above average returns. 23 of the top 50 areas offer yields above 5%, significantly more than is available from more traditional savings options, however, it is clear there is a fine line between a property in a desirable area, the rents that can be achieved and the returns that can be yielded.”

London buy to let market

Property prices in London have regularly risen above the national average; however experts believe this makes the capital less than ideal for property investors.

According to figures from HSBC the average property in London is worth £401,405 and rents for £2,058 per month, giving a gross yield of 6% per year. However, in the most upmarket areas of London, the yields can fall significantly; in Kensington and Chelsea for example, the average yield is as low as 3%.

According to LSL Property Services, rents in the capital have soared, with the average landlord asking around £1,100 per month, a record high. Tenants in London have seen the fastest rise in rents in the country; the average property is now over £81 per month more expensive than this time last year.

David Newnes, Director of Property Service group LSL, said: “Rents in London are red-hot; In spite of the unseasonable weather the rental market has gained some ground. Over the next few months it looks likely the spring bounce will continue.”

Housing experts warn investors should do extensive research before they commit to a buy to let purchase, considering the projected yields, ease with which the property will be let, the on-going costs of maintenance and also the future resale value, before they commit to a purchase.