Landlords can secure close to double-digit returns
Buy-to-let yields climbing in some parts of the country
Landlords can secure close to double-digit returns as buy-to-let yields are climbing in some parts of the country, new data reveals.
Yields are eight per cent or higher in areas around Glasgow in Scotland, including West Dunbartonshire, Renfrewshire, East Ayrshire and North Lanarkshire.
Renfrewshire has seen yields rise by 13 per cent in the past year alone and West Dunbartonshire by seven per cent.
Even in parts of the country where yields are the lowest, it is still possible to make a positive return, the data from property portal Zoopla reveals.
Yields in the affluent London boroughs of Kensington and Chelsea, Richmond upon Thames and Westminster are among the lowest in the country – all at under 4.5 per cent. However, yields in these areas rose by nine, 11 and 13 per cent respectively in the past year.
Up and down the country, tens of thousands of buy-to-let landlords are selling up as it gets increasingly difficult to make a good return from property. Rising mortgage rates are piling further pressure on landlords who are already struggling with increasingly onerous regulations and a less generous tax regime.
Around 40,000 have sold up over the past five years since valuable tax reliefs were withdrawn in 2018.
However, our figures show there are bright spots amid the overwhelming gloom. Furthermore, as landlords sell up, it increases scarcity of rental properties, which helps to boost yields for those remaining.
In demand...the areas seeing sharp rises
Areas around Glasgow have some of the most resilient yields thanks to a concoction of factors. Stephen McGlone, lettings manager at Westgate Estate Agents, says: 'Demand for rental properties is increasing as Glasgow University is rapidly expanding and bringing in a lot of new people looking for accommodation.
'Morgan Stanley and Barclays are growing their workforce in the city, so there are a lot of staff looking for accommodation.' McGlone adds that there is also demand for Airbnb rentals as Glasgow is a popular place to visit.
Toby Parsloe, analyst for estate agent Savills, explains that areas with the highest yields tend to be those where property prices are lower, but where there is a strong employment market where some workers can afford comparatively high rents.
Parts of Scotland and areas such as Middlesbrough and Sunderland fit the bill, the latter of which have yields of 8.2 and 8.4 per cent respectively.
He adds that Glasgow in particular has seen 'substantial rental growth of 33.5 per cent since March 2020, while the number of new rental listings is down by 15 per cent, increasing competition'.
...but high yields aren't everything
There are two main ways to make a profit from buy to let: the income you achieve from renting out a property; and the capital gain you can make if its value rises.
Ideally, landlords look for investment properties that can achieve both. Vanessa Warwick, co-founder of landlord network PropertyTribes and a landlord herself, says there are no areas that currently offer both, but individual properties do.
However, investors will have to do their homework to find them.
'Finding an area that has high yields and high capital growth is the holy grail but I am not sure that such a place exists,' she says. 'Every location, every street, every property will each have a different set of metrics that need to be researched and understood.'
Ashley Thomas, director at mortgage broker Magni Finance, says that investors shouldn't necessarily be put off by areas with low yields.
'Prime London will always have low yields, but properties in these areas have seen some of the strongest capital growth,' he says. 'London is still seen as a resilient and profitable market, especially for foreign investors.'
However, Warwick believes that landlords should focus more on what they can achieve through rents. 'Yield is money in your pocket that you can spend, whereas capital growth is speculative and takes many years to accumulate,' she says.
'It should not be the main focus for most landlords unless they have significant other income.'