HMRC figures for the 2018 to 2019 tax year showed stamp duty fell by £1 billion when compared to the previous year. Experts have blamed that partly on a decline in buy-to-let investments and the fact that most first-time buyers no longer need to pay stamp duty. In 2016, George Osbourne clamped down on landlords while handing breaks to first-time buyers in a move designed to reduce the number of buy-to-let investments. That’s resulted in the slowdown expected across London and the South-east, but regional areas appear to be faring better.
Is stamp duty the only reason Buy-To-Let landlords are looking north?
A significant, sustained change in the habits of buy-to-let landlords is very unlikely to be based on a single reason. While it’s reasonable to look at stamp duty and regard it as a factor in London-based landlords’ decisions to head north-west, that’s very probably not all that’s going on.
There’s a lot to be said for managing a local rental property – it just carries fewer potential complications and logistical difficulties than living further away from your investment. Purchasing a buy-to-let out of town is a big commitment. If you’re London-based, then looking as far away as cities like Liverpool, Manchester, and Lancaster could create challenges. So, keeping in mind that purchasing any investment property is a numbers game, what precisely does the north-west have going for it as a ‘buy-to-let destination’?
The X factor, investment, and development
Some cities just have a certain buzz about them, and Manchester, Lancaster, Liverpool, and a whole host of other Northern towns are on a roll right now. Cities like Manchester may owe their origins to the pioneers of the British industrial revolution, but things have changed a lot. Long gone is the smoke of the furnaces and the noise of beaten metal– in 2020, alleyways once filled with horse-drawn commercial traffic are a haven for diners, drinkers, and coffee lovers. The buzzing mill machinery ground to a permanent halt many years ago, replaced by airy, attractive downtown loft apartments. The canals, which once formed the city’s arterial transport system, now get used for far more leisurely pursuits.
In Liverpool, founded on merchant shipping, and so heavily reliant on its docks for so long, things are also different. A vibrant, multicultural city still sees its fair share of shipping containers, but the redevelopment of Liverpool’s dockland apartments began way back in the eighties and continues to this day.
Further education, business, tech, jobs
The North-west of England has some excellent universities, and that’s no secret. While students represent a ready-made market for buy-to-let investors, their presence does more when it comes to raising up regional areas. Combined, Liverpool and Manchester form a region which sits in 9th place in the 2020 Global Start-up Ecosystem Report by Start-up Genome. The two cities ranked 5th in Europe and 2nd in the UK – behind only London. Nine universities spanning the two urban centres fuel a start-up ecosystem worth billions and push out a steady supply of highly-qualified STEM graduates while running multiple incubator schemes.
Many Northern towns and cities are seeing a switch from industry to tech and IT-related enterprises – based on the strength of their universities. However, that’s not the whole picture. Back in 2011, the BBC famously decided to up sticks and move its staff to Salford in Greater Manchester, where costs were more favourable. The relocation has been a huge success and changed many perceptions about the North too. Regions outside of London and the South East are more affordable, but they also have a lot to offer in terms of jobs and education.
Cost of living, cost of property up north
Buy-to-let in London requires a more significant investment. Houses cost less in the North of England than homes in London and the South-east – that’s just an unavoidable fact. According to the Office for National Statistics, buying a house in some areas of the North-west will set you back as little as 2.8 times average annual earnings. Compare that with the borough of Kensington and Chelsea in London, and you’ll need to find 39.6 times average annual earnings to buy a residential property.
Not surprisingly, that means buy-to-let landlords can achieve higher yields by venturing up North. Data shows that it’s still possible to find properties in cities like Liverpool and Manchester that return more than 10% yield and are available for under £100,000. That’s just not possible anywhere in the South-east of England. Additionally, the short let and online letting agents at Portico Direct recently shared data which showed that short term let properties in Fairfield, Liverpool are achieving the best yields in the North West’s largest cities of Liverpool and Manchester at a staggering 27.2%.
Boom for buy-to-let in the north
As the North of England continues to gain popularity, investors of all types are keen to ride the wave – and buy-to-let landlords are no different. The fact is, managing a property remotely in 2020 is far easier than it was a decade ago, so the barriers to investing farther afield are fewer. Higher taxes are certainly a factor behind the London buy-to-let exodus, but they’re definitely not the only factor.
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