North West of England named as most lucrative region for PRS landlords

The North West of England is the most lucrative region in the UK for private rented sector landlords with Manchester and Liverpool coming out top for rental yields.

The latest quarterly report from online property marketplace LendInvest also shows that
Cardiff, Coventry and Oldham come next, followed closely by Sunderland, Blackburn and Durham

The report, which tracks changes in trends in rental yields, capital gains and landlords’ total return on investment, also shows that London and the South East lead house price growth.

Indeed, all of the top 15 performing postcode areas for capital gains are located in London and the surrounding area. However, inner London takes only 18th place for rental yield, but is top for capital gains

Overall, capital gains continue to track average house price and 80% of the 15 best postcode areas for capital gains also feature in the top 15 for average house prices.

However, the report points out that rental yields are no indication of average house price. Only one of the top 15 postcode areas for rental yield also features in the top 15 for house prices.

Christian Faes, chief executive officer of LendInvest, believes that tax changes could impact the market next year. ‘There could be some weakening in London’s dominance of capital gains tables if house price growth does soften slightly as forecast, and as new buy to let stamp duty hikes take effect,’ he said.

‘Inner London margins may narrow slightly, creating opportunities for house prices in other postcode areas, particularly those in the south of England, to better compete,’ he added.

But he also explained that changes to mortgage interest tax relief and stamp duty for landlords will help to professionalise the buy to let market and this would benefit tenants and aspiring home owners.

‘Landlords whose tax payments under the new regime make letting their properties unsustainable, may make arrangements to leave the market. In turn, we will see fewer highly geared rental properties that push up prices and take stock out of the housing supply for aspiring owner occupiers and first time buyers drawn to densely populated urban area for work,’ explained Faes,

He also said that across the country there is still no one place for market leading yields and capital gains and 2016 could be the year of the ‘cross country landlords’, professional landlords who live in one city and rent out houses in another.

‘We could expect to see more landlords letting property in the North and Midland’s major urban areas for more immediate upside, without moving from their family homes in which gains can be longer to materialise,’ he added.