Stoke-on-Trent has been named the UK’s buy-to-let (BTL) ‘sweet spot’ amid evidence of a growing north-south divide within the sector.
The West Midlands city is the place where landlords can find the best combination of affordability and rental return, making their investment more efficient than anywhere else in the country, according to research by Property Partner.
In a study of 100 major towns and cities, the ten most efficient areas to become a landlord in Britain were revealed to be in the north, while every one of the least efficient BTL locations was in the south.
Investors can enter the BTL market more easily if their income is relatively high compared to local property prices, and they will earn a stronger rate of income return if those properties command high levels of rent relative to their price.
The south dominates the bottom of the rankings due to to high demand pushing up prices, resulting in high capital requirements to enter the market and weaker rental yields.
Poole, in Dorset, was found to be the most challenging buy-to-let investment, followed by Central London and Sevenoaks, in Kent.
UK’s top ten buy-to-let sweet spots:
| Town/City | Average Annual Income | Average Property Price | Average Rent per year | House Price/ Earnings | Annual rental Yield | Yield/ (House Price / Earnings) Score |
| Stoke-on-Trent | £26,250 | £117,586 | £6,672.00 | 4.48 | 5.67% | 1.27% |
| Oldham | £28,361 | £125,307 | £6,840.00 | 4.42 | 5.46% | 1.24% |
| Liverpool | £29,500 | £162,373 | £9,672.00 | 5.5 | 5.96% | 1.08% |
| Leeds | £31,860 | £206,544 | £14,292.00 | 6.48 | 6.92% | 1.07% |
| Middlesbrough | £27,810 | £130,798 | £6,540.00 | 4.7 | 5.00% | 1.06% |
| Newcastle-upon-Tyne | £31,788 | £170,892 | £9,552.00 | 5.38 | 5.59% | 1.04% |
| Stockton-on-Tees | £30,134 | £141,807 | £6,816.00 | 4.71 | 4.81% | 1.02% |
| Gateshead | £29,011 | £168,644 | £9,756.00 | 5.81 | 5.78% | 1.00% |
| Rotherham | £29,276 | £130,867 | £5,640.00 | 4.47 | 4.31% | 0.96% |
| Rochdale | £28,397 | £165,110 | £9,252.00 | 5.81 | 5.60% | 0.96% |
Dan Gandesha, founder of property investment marketplace Property Partner, said: “What our research reveals is a clear north-south divide in the investment opportunities facing buy-to-let landlords.
“We have always been at pains to point out to investors that prime locations such as Kensington and Chelsea can offer some of the lowest yields available, because prices have raced ahead while rents have failed to keep pace.
“It just goes to show, you shouldn’t always follow the crowd and the right investment could be on your doorstep where there is far less overall demand.”
Mike Richards, director at London-based Mortgage Concepts Associates, said he was not surprised by the findings.
“Yields up north are a lot better,” he explained. “You would be lucky to get 1.5 to 2 per cent on the properties in London, which is nowhere near the level you need at the current stress rates.
“For the same deposit, you could possibly buy two, three or four properties in Stoke. It has always been better in the north, but investors in the south have shied away from buying there. The divide is getting bigger and bigger.”
simon.allin@ft.com
