Property Investment Analysis: Rental Price Growth and Capital Growth in North vs South
With entry prices and the associated taxes in the south of England outpricing large numbers of investors, many experienced buy-to-let investors have turned to the northern cities for new investment opportunities.
The north has strong economic growth, affordable prices and large student populations, so we can assume that it’s an ideal place for property investment; but is that really the case?
We have compared rental price growth and capital growth amongst northern regions to give our readers a deeper insight into the northern housing sector. With stamp duty rates implemented last year and lenders tightening their eligibility criteria, it’s more important than ever to fully ensure you are investing wisely.
Let’s take a look at some statistics:
Rental Price Growth - North VS South
Rental yield refers to the money earned from rent on a property investment. To estimate the approximate NET rental yield, you can subtract the annual expenses of the property from the corresponding rental income, and divide the result by the total cost of the investment. New developments, with higher popularity among tenants and less repairing expenses, are generally able to provide higher rental yields for investors.
The latest Rightmove Rental Price Tracker (2016 Q4) showed that the top locations of rental prices growth are dominated by the North. The result revealed that rental property in Yorkshire and the Humber topped the chart by providing 4.5% annual rental price growth. This was followed closely by the North West with an annual growth of 4.4%. Even though rental price growth in the North West dropped a small 0.8% over the last quarter, Rightmove’s Head of Lettings Sam Mitchell still recommended the North West as a great buy-to-let hotspot for its strong annual performance, “Investors looking for the strongest yields could consider investing in certain areas in the North West where both demand and yields are high.”
With 2.6% rental growth, the third highest in England, the West Midlands is a region that savvy investors can’t miss.
But compared with strong growth in the North, the Southern regions have failed to provide the same level of attractive rental price growth. The drop in London’s rental price is especially obvious –4.4% annually and 3.9% quarterly.
Capital Growth - North VS South
We’ve seen that strong rental price growth in the North is ahead of the South but how about the capital growth? Capital growth refers to the increase in the market value of a property over the invested amount. The latest House Price Index reportshowed that property prices in England and Wales are still showing steady growth despite the uncertainties brought by Brexit. However, price growth is being driven primarily by regions in the North and Midlands rather than the capital.
Average house prices in the country have increased by 2.3% over the year, with what Rightmove called “Mighty Midlands” leading the rest of the country. Record high capital growth is observed in East (5.7%) and West (4.2%) Midlands. The North West and Yorkshire have also achieved a favourable capital growth of 2.3% and 2.2%.
Comparatively, the country’s favoured London property market has only record a 0.9% annual growth, which is the second smallest recorded price growth across England. The South East (excluding London) is the only region that recorded a high capital growth rate (3.3%) in the survey. Still, with the high price and very ordinary rental growth, investors still cast a serious doubt if it will be smart to invest in the South East.
Rental Price Tracker, Rightmove: http://www.rightmove.co.uk/news/rental-price-tracker/
House Price Index, Rightmove: http://www.rightmove.co.uk/news/house-price-index/
Speak to us for more information about buy-to-let investment in the UK.