Buy-to-let hotspots are the ‘talk of the town’ right now. Clearly we are in some kind of property boom, however fleeting or localized (i.e. London & the south-east) it is.
The talk of property hotspots has always made great Internet copy. The property PR people love the eye catching headlines.
What are property hotspots?
A property hotspot can mean what ever the story hungry media demands. Back in previous property booms we even had a range of books schooling landlords on how to identify the next property hotspot. I remember as a student in Bristol getting fired up 25 years ago by an article in one of the national newspapers suggesting that Nottingham was the next property hotspot. The story was that one cash laden investor bordered a train from London and then on arrival went around the local estate agents picking up a hatful of terraced properties for the London equivalent of property loose change (£10-15k). The properties subsequently jumped in value within weeks of him exchanging contracts making him an instant ‘fast buck’. Needless to say, where did I end up living for a good 20 odd years, but Nottingham. Not entirely the result of this article may I add, but affordability of prospective rental property was definitely a factor in my choice.
Old school property hotspots
In the property boom times, both the 80’s and the noughties, buy-to-let hotspots were characterized by the capital growth potential of respective area. Rental values were often seen as an aside. It was all about the the prospective growth of the capital value of a buy-to-let property. Times have changed.
Buy-to-let hotspots are now more likely to be characterized by the potential rental yields.
This trend is encouraging. It recognizes, rightly in my view, that the game of property poker is over and the fast buck capital appreciation, outside world cities like London, is not likely to happen in my lifetime.
Welcome to the long-term property investment game, where rental income is equally important to potential capital gains.
So where are the BTL property hotspots?
The latest raft of property hotspots brought to you by mortgage and property service companies keen to advertise their wares do give a landlord some ideas of the highest yielding areas. They also highlight the dubious nature of some of the rental yield data out there.
For instance we have the Telegraphs rental figures supplied by Savills with some lovely pictures of some quite posh bits of the UK. No grimey council estates in Hull here!
The Telegraphs property hotspot has:
Newham in London with a 7.6% yield followed by, Oxford 6.3%, York 6.3%, Ealing 5.9%, Southwark 5.9%, Cambridge 5.8% and Brighton 5.6%.
These property hotspots have been assembled using the average property price and the expected rent on a 2 bedroom apartment. Not exactly scientifically rigorous, but check those lovely pictures!
If you are not convinced by all the lovely pics in the Savills property hotspot piece, then there is always the rental yield research carried out by HSBC.
Their rental data is at least not based on pretty pictures, they do have the top UK and London buy-to-let hotspot to offer potential UK property investors. The top 10 rental yields in the UK in this case are:
Southampton 8.73%, Manchester 7.98%, Nottingham 7.67%, Blackpool 7.63%, Kingston-Upon-Hull 7.47%, Coventry 7.09%, Oxford 7.02%, Portsmouth 6.5%, Liverpool 6.5% and Cambridge 6.48%.
This time thedata uses the average house price and average rent. This unfortunately is not likely to accurately reflect a landlord’s true prospective rental yield as landlords will naturally select higher yielding properties and investments. The rule of thumb is the smaller the property the higher the expected yield. I’ve called before for accurate rental yield data, to help landlords and property professionals to accurately assess the merits of prospective property investments.
Until we get it, the ubiquitous property hotspot remains a bit of an interesting irrelevance.