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Investors head north for best buy-to-let hotspots

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Written by: Paloma Kubiak
06/01/2016
High rents, cheap mortgages and strong house prices have led to a booming buy-to-let market.

But as property website Rightmove.com warned last year, the price tag for a house in London could rocket to an average of £1m, pushed by high demand and low supply in the capital.

So where are potential investors flocking to for a maximum return? According to independent property investment specialist, Experience Invest, the answer may lie ‘up north’.

‘Northern powerhouse’

Big changes to the buy-to-let market are due in April which mean people buying a property costing more than £40,000 will face an extra 3% stamp duty bill on top of the normal stamp duty applicable on the property sale.

So to reduce the amount they pay under the new stamp duty rates, savvy investors are looking to the ‘Northern powerhouse’, where house prices are lower and yields tend to be higher.

And with thousands of students heading to northern universities, investing in student property is another plus.

Dale Anderson from Experience Invest reveals the top five northern cities in which buy-to-let and student investments are booming:

Liverpool – a safe bet

“Liverpool has always been a high yield place for rental income, offering some of the highest returns in the UK – so it’s forever been a safe bet. Expected deliverable supply in Liverpool is the equivalent of 14 per cent of full-time student numbers. Along with this, there is going to be 25,000 purpose built student rooms by 2017, meaning there’s going to be lots of potential coming up for investors.”

Manchester – best place to invest

“Manchester is arguably the best place in the North to invest. The city is at the centre of the Northern Powerhouse Scheme. The population is growing year on year meaning there is a big demand for housing from tenants and owners. East and North Manchester have good rental yields and good low price properties. With this being such a vibrant and large city, properties can vary from back to back semis to modern city centre apartments. Not only this, there are also 105,000 students across four major universities. The Manchester market is ideally placed for more development, which is set to happen in the next few years.”

Newcastle – thriving student demand

“The North East is very favourable when it comes to returns, with up to nine per cent often achieved in central Newcastle Upon Tyne and some of the suburbs, compared to an average six per cent nationwide. In some areas, there has even been a 50 per cent increase in rental values due to the massive cultural and business rejuvenation throughout Newcastle. The thriving student population also makes it a great choice. Since 2008, 11,000 student rooms have been granted planning in the city to accommodate its expanding student population. Even with 11,000 rooms under construction or in the pipeline, experts believe that construction will not be able to keep up with the rising demand for student rooms in the city.”

Sheffield – firmly back on the map

“Sheffield has benefitted from heavy rejuvenation over the past 10 years – putting it firmly back on the map. Due to its young population, rental property is being snapped up faster than it can be provided, according to property investment experts. It has a super tram with some of the cheapest fares in the UK, tonnes of shops, bars and a buzzing music scene – making it hugely appealing to the 60,000 students that live there, attending both Sheffield University and Sheffield Hallam.”

Leeds – popular among investors

“Being the third biggest city in the UK, and the biggest city in the North of England – it’s no surprise that Leeds is popular among investors. The city has an expanding population and student numbers continue to increase. Just outside of the city Headingly and Hyde Park are mainly populated by students. In the centre of the city, the combination of Victorian terraces and warehouses from the city’s industrial past as an important textile and trading town are now mixed with modern apartment blocks and offices. Despite its popularity, the house prices are nowhere near the £1m, £2m, £3m mark, as in London, the stamp duty is still staggeringly low.”

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