Manchester tops a list of postcode areas in England and Wales where rental returns are most profitable for landlords. The rental yield on buy-to-let property in the north west city was 6.8% between 2010 and 2016, according to an index compiled by LendInvest, an online property investment firm.
Other lucrative regions include; Luton, Coventry and Outer London, all yielding 5.8% in rental returns for buy-to-let investors over the same period. When it comes to capital gains on property, however, the west central postcode area of London comes out on top, recording an 11% return as prices rose significantly more strongly than elsewhere in the country.
For overall return on investment — incorporating both rental yield and capital gain — east London tops the list at 17.8%. Sunderland, at 3.2%, recorded the worst return on investment over the six years.
There was also a correlation between how areas voted in the EU referendum on 23 June, in which the country backed Brexit, and both the rental yield and capital gain. Those with the highest rental yields tended to vote to leave the EU, while those with the biggest house price gains voted to remain.
Just two of the top 20 local authority districts for rental yield — Manchester and Liverpool — voted to remain, according to LendInvest. Only two of the top 20 for capital gains — Barking & Dagenham and Spelthorne — voted to leave.
"The areas that have seen the best of the recent boom times have generally enjoyed the biggest house price rises, and with that offered the greatest capital gains," said Christian Faes, co-founder and CEO of LendInvest. "Perhaps it is no surprise that they were sufficiently content with the status quo to vote remain. Areas which have seen far more modest house price rises, appear to have been more disposed to voting for the change promised by Brexit.
"Brexit may create opportunities for property investors, particularly professional and experienced ones. House prices are expected to soften, so some would-be buyers may put off buying. But they still need somewhere to live, which is good news for landlords. What's more, if house prices do cool as predicted, then investing in property will become even more enticing."
The buy-to-let market has cooled since the Treasury hiked taxes for landlords. There is a 3% surcharge on basic stamp duty rates for purchases of additional property. Tax reliefs for rental income and maintenance costs have also been cut. It is part of an effort to increase homeownership by preventing first-time buyers from being crowded out of the market by buy-to-let investors, though landlord groups argue it will mean fewer rental properties and so higher rents.