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Can you afford buy-to-let property in the UK’s most lucrative areas?

Which? highlights the cheapest areas for buy-to-let investment

With average rents dropping for the first time in six years and tax breaks for landlords set to decrease, it’s becoming more important to purchase buy-to-let property in a prosperous location.

The LendInvest Buy-to-Let Index recommends the best areas to invest in buy-to-let property, based on a combination of average house price growth, transaction volume growth, rental price growth and yields.

But how affordable is it to buy a property in the nation’s most buoyant areas for buy-to-let?

We’ve looked at average house prices in these regions, identifying where to find the cheapest homes and where prices are on the up, so you can find the perfect property for your buy-to-let portfolio.

  • If you’re thinking of investing in buy-to-let property and need some impartial advice on your mortgage options, call Which? Mortgage Advisers on 0808 252 7987.

Which areas are best for investing in buy-to-let property?

The table below details the top 10 postcode areas for buy-to-let property, according to February’s LendInvest Buy-to-Let Index.

We’ve added the average house price for each area using Land Registry data from December 2016.

Romford, in the London borough of Havering, tops the table thanks mostly to a huge increase in the average house price over the past 12 months. The average house in Havering now costs £353,659, according to Land Registry data.

Buy-to-let investors with a smaller budget might be interested in Northampton, which ranked as the 8th best area for buy-to-let investment with the average property costing just £190,844. That’s some way below the national average of £220,000.

Rank Market Average house price 12-month price increase Rental yield
1 Romford £353,659a 16.55% 5.24%
2 Luton £226,975 15.19% 4.73%
3 Dartford £290,231 17.75% 4.74%
4 Rochester £232,861b 13.96% 4.71%
5 Watford £355,771 17.17% 4.24%
6 Enfield £394,691 16.97% 4.60%
7 Southend-on-Sea £265,223 14.41% 4.50%
8 Northampton £190,844 8.11% 4.77%
9 Colchester £250,365 12.21% 4.44%
10 Stevenage £279,590 9.39% 4.06%

Table notes: House price data from Land Registry UK House Price Index December 2016 Average house price for Havering used. b Average house price for Medway used

Explore the cost of the top 50 areas with our interactive map

The interactive map below shows the geographical spread of the top 50 areas in England and Wales.

The majority of the most lucrative areas for buy-to-let investment are located in London and the south-east. There are no postcode areas north of Yorkshire in the top 50.

Just two areas in Wales (Cardiff, Newport) made the cut. Meanwhile, only two areas on the south coast (Brighton, Bournemouth) and one in the south-west (Truro) appear.

To find out the average property price in each region, hover your mouse over the house icons.

Where are the buy-to-let property bargains?

The table below shows the cheapest postcode areas ranking in the top 50 areas for buy-to-let investment.

Investors searching for a bargain might want to look outside of London and the south-east. Liverpool, Nottingham and Wakefield were the cheapest areas ranking in the top 50.

Rank Market Average house price  12-month price increase Yield
42 Liverpool £119,968 5.65% 5.50%
43 Nottingham £127,415 7.38% 4.93%
47 Wakefield £140,114 5.04% 4.72%
25 Walsall £149,268 5.53% 4.66%
39 Sheffield £150,359 3.96% 5.17%
49 Newport £153,383 3.99% 4.77%
21 Manchester £156,632 6.60% 6.15%
31 Birmingham £165,249 4.80% 4.99%
12 Coventry £165,940 7.35% 5.10%
34 Leeds £167,775 7.46% 4.74%

Which areas are on the up?

When you’re buying property primarily as long-term investment, it’s important to know whether house prices in the area are on the up. 

The highest price rises were found in London and the South East. In Dartford, average house prices increased by 17.75% in the past year. Significant capital gains were also seen in Watford, Ilford, Enfield and Bromley.

Rank Market Average house price  12-month price increase Yield
3 Dartford £290,231 17.75% 4.74%
5 Watford £355,771 17.17% 4.24%
22 Ilford £404,344 17.04% 4.55%
6 Enfield £394,691 16.97% 4.60%
27 Bromley £436,204 16.56% 4.02%

Which areas offer the best yields?

Rental yield, a property’s annual rental income expressed as a percentage of its total value, is a commonly-used measure of profitability.

Twelve postcode areas across the UK offer yields above 5%, according to LendInvest. At 6.15%, Manchester offers the best yield by some distance of all the areas in the top 50.

Rank Market Average house price 12-month price increase Yield
21 Manchester £156,632 6.6% 6.15%
42 Liverpool £119,968 5.65% 5.50%
1 Romford £353,659a 16.55% 5.24%
50 Cardiff £190,716 3.59% 5.19%
39 Sheffield £150,359 3.96% 5.17%

Table notes: a Average house price for Havering used

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