Landlords pick Manchester over London for higher returns
Manchester has surpassed London in terms of the best yields for landlords, despite the former having a much lower average rent.
London ranked fifth in a survey of rental yields, with the average annual return on investment in the capital at just 2.25 per cent, versus 4.21 per cent in Manchester, according to specialist property litigation solicitors at Helix Law.
Yields are lower as London has some of the highest average property prices in the UK – an average property in London costs £673,653, versus £247,000 in Manchester and £288,000 in Edinburgh.
“Manchester is a good example why landlords and seasoned property investors look beyond headline property prices,” explains Alex Cook, specialist commercial and property litigation solicitor at Helix Law. “Lower entry costs don’t necessarily mean lower returns – they can often deliver better yields when rental demand remains strong.”
Demand for housing and flats in Manchester has skyrocketed in recent years as people increasingly seek to relocate from the capital for more affordable accommodation.
Skyrocketing rental costs for landlords
Landlords have seen slowly-dwindling yields for over a decade, with the end of tax-deductible payments combined with increasing regulation.
Lettings and property management agent Hello Neighbour has said that landlords were being charged £2bn in London alone in “excessive fees”.
These fees are related to exit fees and restrictive contracts with estate agents, Hello Neighbour said, with many letting agents charging owners up to 20 per cent of annual rent in combined management and letting fees.
Angela Rayner has been urged to include landlord reforms in the upcoming Renters’ Rights Bill, with concerns that the bill will lead to increasing numbers of landlords exiting the sector.
“Tax and policy changes aimed at second homeowners and landlords are leading to weaker demand and more sales by these owners, which is compounding the impact on house price growth at a localised level,” Zoopla said in its latest house price index.