The North West is the top hotspot for rental yields with an average yield of 5.4%, followed by Scotland with 5.3% and Yorkshire and the Humber with 4.9%, Shawbrook Bank has found.
Lower property prices mean it is easier to achieve better rental yields and the city is attracting students and employees from all around the country. The average UK house price is currently £228,000, which is 43% higher than the average house price in the North West – £159,000.
Emma Cox, sales director for commercial mortgages, said: “Landlords have had a rough ride over the past few years with multiple tax changes, but our research shows that it’s not all doom and gloom for potential investors in 2018.
“Lower rental yields in London and affordability constraints for investors has driven interest North, where borrowers are chasing the yield and heading to locations with lower average house prices.
“There are still interesting times ahead for savvy investors and good investment opportunities remain.
“However, when landlords invest far away from their home turf, they can run the risk of falling foul to local knowledge.
“Smarter local investors may be seeing an opportunity to divest themselves of their less desirable housing stock, so it’s important for buyers to do their research to make sure they understand the local supply and demand before investing.”
The ‘UK Buy to Let’ report, produced by Shawbrook Bank and compiled by the Centre for Economics and Business Research (CEBR) has predicted annual property price inflation to be more subdued in the five years up to 2023 than over the last few years.
The report forecasts average annual house price predictions for the years 2017 to 2023 to be at 4.5%, compared to an average of 7.0% for the high-growth years of 2014 to 2016.
Stretched affordability ratios, years of weak wage growth and the prospect of further interest rate rises all weigh in on the outlook for house prices in the UK for the next few years.
House price growth has slowed in the capital particularly, with Brexit and the resulting uncertainty regarding the future of the financial services sector in the City of London looming over activity in the prime end of the market as have higher stamp duty land tax rates.
The report expected price growth in London to continue to trail behind the rest of the country for the next two years.
Furthermore figures from estate agent Aston Chase already show the percentage of high-end purchases from overseas in London’s most expensive postcodes dropping from 44% in 2016 to 35% last year.