Does Leeds offer better buy-to-let opportunities than London?

Leeds can offer buy-to-let investors a lot for their money; in fact, the city can offer a lot more than other areas of the UK.

Some landlords see it as a priority to obtain the best capital returns where as some prefer the regular income of a rental property, whilst some want both. Many landlords may be looking for an investment close to where they live and this means that they will not have travel issues and they could also save on agent fees.

Leeds buy-to-let market

If an investor is looking for a high income then there are certain areas of the country that can offer great returns, Leeds appears to be looking most favorable as research has found that investors can achieve gross yields of 8.5% in the city.

This is considerably higher than London where yields are 3.5% and this difference has been put down to the higher property prices in London. The research considered properties in both Leeds and London and the average yields that can be achieved. In actual fact, the market for property investment in Leeds is a lot more stable than that of London. In London, property prices and rental prices are rising at a worrying rate and this could see the market heading for trouble.

Leeds offers investors great potential because properties are lower in price by an average of £400,000 when compared to London. This means investors will get better value for money and a better standard of living for a lot less than it would cost in London.

Since the beginning of this year, the data of many new tenants has been analysed to determine what percentage of their income is used to cover rental costs. It was found that 38% of new tenants spend between 21% and 30% of their salary while 31% of people spend between 11% and 20% of their income. Only 16% of those spend between 31% and 40% of their income which shows that people get better value for money in Leeds.

Figures from The House of Commons Library, offers impartial information and research services has found that private rental sector costs in London have risen considerably as people are now spending an average of 62% of their income on rent. This is a significant jump from the 49% seen in 2010.

However, the demand from tenant is far higher than supply although occupancy levels are sitting at more than 99.5% and that has been the case for the last two years. Rental prices are more realistic than other areas of the UK, but despite this, landlords who invest in property in Leeds are likely to see gross rental yields of 6-7% in the city centre. Following the recent cut in interest rates, the attractive yields as well as regeneration projects underway in the city, there has been a surge in interest from investors. This interest is extremely promising for the city and investor activity is likely to continue to improve over the next few years.

Mark Burns

Mark Burns is a Director and Property Investment Consultant at Hopwood House. With over 10 years' experience in property investment, Mark has provided investors with a wide range of opportunities in exotic locations around the world.

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