Tuesday, 22 September 2015

Headingley and Burley Buy To Let Yields at 7.63% - but should you look further afield?

I was at a recent business networking event in Headingley and Burley, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Headingley and Burley when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Now regular readers of my articles of the Headingley and Burley Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as St. Matthias Estate on the edge of Burley or the Granby estate off St. Michaels Road in Headingley, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down).  The relationship works in reverse as well, so in such upmarket areas as Canterbury Drive area, properties offer good capital growth, but at the expense of a decent yield.  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Headingley and Burley today is 7.63%, which when you compare with say Hartlepool, the North East’s buy to let hotspot  at 7.73% pa, is very good. However, when you compare it with the 9.43% in the Anfield area of Liverpool, doesn’t look as good. But Liverpool property,  have dropped in value by 2.2% in the last 12 months and the Hartlepool property market has gone down by 1.4%.

When you compare the long term house price growth, it gets even worse.  Looking at the graph, since 1995 property values in Headingley and Burley have risen by 125.84%,compared with Hartlepool at 21.02% and Liverpool  at 90.11% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords , a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.

At the end of the day, as a Headingley and Burley landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment.

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