17th July 2017

UK buy-to-let property investment hotspots for SA investors

The buy-to-let market is shifting quickly in England. This multi-billion pound investment class is now following rental yields rather than capital growth as people are forced to rent rather than buy. The resilience in the market is evident as UK investors, post the Brexit referendum and now an ill-timed General Election, “simply get on with life”.

This is according to Craig Illman from Propwealth, a UK-based property company dealing with South African investors, who says the secret to savvy investing is to “get stuck in when others are nervous” and this is very evident in the UK buy-to-let market.

The London property market has levelled off, owing largely to an over-heated environment which started to show signs of weakening during 2015, says Illman. “There might still be a certain amount of investor’s uncertainty, but the UK is the UK, and with its growing rental population and lack of housing stock this investment class is still charging ahead.”Feedback from the market during the first half of 2017 has indicated that investors are looking north as they chase areas offering more affordable prices and strong rental demand.

New research from Private Finance has revealed that the UK’s top buy-to-let hotspot is now Liverpool, delivering average rental yields of 5%, once mortgage costs are taken into account.

As housing and mortgage costs have the biggest influence on yield, Liverpool takes the top spot as it has a combination of low average house prices at £122 283 and strong rents at £1 021 per month.

Nottingham comes second, with a rental yield of 5.6%, followed by Coventry at 5.4%, then Greater Manchester at 4.3% and Portsmouth at 4.2%. Cardiff, Blackpool, Lincoln are next with rental yields of 3.9% each. Bournemouth and Southampton make up the rest of the top 10 with rental yields of 3.8% and 3.7% respectively.

According to the research, which calculated rental yields in the 50 UK towns and cities with the highest proportion of private rental housing stock, six out of 10 of the areas with the lowest house prices are also in the top 10 lists for best rental yields. Within the top 10 buy-to-let hotspots, average annual interest-only mortgage costs vary significantly from £5 940 in Blackpool to £13 548 in Bournemouth.

Propwealth now oversees over 140 properties in Greater Liverpool and works alongside rental agents, solicitors, accountants, developers and managing agents to offer a bespoke service to overseas investors. Their properties range from £40 000 to £63 000 with net yields of 6%-7%. Historic capital growth in Liverpool ranges from 5%-10% per annum.

Illman says there is a surge in South African investors as the rand has strengthened against the pound and people are taking advantage of the relaxed Reserve Bank offshore allowances.

The majority of these investors have available cash in UK banks earning near to zero interest and they trust bricks and mortar bought in a First World environment, he says. “They very seldom want, or need mortgages, and as cash buyers, enter the market at the lower end searching for high rental yields with a relatively risk free outlook of 10-20 years on their property portfolios.”

Furthermore, by buying the right property in the right location in the UK, this is offering South Africans an opportunity to spread their investment returns offshore in a hard currency, adds Illman.

“The UK government is still dedicated to projects of massive regeneration and infrastructure building like the High Speed 2, which is linking the north of England to London as well as ongoing developments within most cities.

Furthermore, Barclays Wealth UK Property Predictor Report 2017 is expecting property prices to rise by 6.1% in the UK in the next five years, meaning the average property value would be £300 000 by 2021. Nearly two-thirds (65%) of property investors are buying bricks and mortar for rental income. Investors are leaning on buy-to-let to fuel their property portfolios, with research showing that 62% of those with rental properties expect the proportion of the income they receive from rent to increase over the next three-to-five years, with half predicting it will rise by up to 20%.

“Faced with increased taxation and tougher mortgage lending criteria, it’s so important for landlords to ensure they invest in properties that will maximise rental income and minimise void periods,” says Illman. “Renovated, mid-terrace Victorian flats offer good returns, as they deliver high yields and occupancy. There is huge demand for one- and two-bed accommodation in regeneration areas and Liverpool is offering this.”

Anthony Doyle and Craig Illman will be visiting Cape Town and Johannesburg during mid-August to launch a series of high-yielding Liverpool investments to buyers. Book an appointment via the website or directly by emailing info@propwealth.co.uk.