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Best buy-to-let returns are outside London

Best buy-to-let returns are outside London

A new report has highlighted Southampton as offering the highest potential returns for landlords nationwide, closely followed by Manchester, Nottingham and Blackpool.

The report by HSBC studied the latest data on buy-to-let returns using official data from the Office for National Statistics and Land Registry.

It found that while Southampton tops the list for highest rental yields overall, Reading and Brighton provided the biggest jump in potential returns for landlords last year.

The two commuter towns experienced the biggest increase in rental yield & returns from rent as a percentage of the property value & anywhere in the country last year.

Southampton, with rental yields of 8.73%, currently tops the list for rental returns. Manchester, Nottingham, Blackpool and Hull complete the top five locations with the best rental yield at 7.98%, 7.67%, 7.63% and 7.47% respectively.

These areas offer the characteristics that make for excellent buy-to-let investment, according to the experts. These include relatively low house prices coupled with strong demand for rental property from large student and young professional populations.

The lowest yields were registered in areas such as London where recent price rises have been large and rapid, outpacing the growth in rents.

Peter Dockar, head of mortgages at HSBC, said: “House prices in the top-yielding locations – while still out of reach among many first time buyers – are relatively affordable for landlords investing in property and the demand from young professionals has pushed up rents and driven up the returns.

“London is often seen as the haven of property investment with many believing the streets are paved with gold. However, while the highest rents in the country are an attractive draw for landlords, high house prices in the capital squeeze yields and limit the returns available. As a result, returns can often be far more attractive in other areas so it certainly pays for landlords to do their research.”