Is London the best buy-to-let investment?
The latest research by lettings management platform, Howsy, has looked at the facts and fingers of investing in London’s buy-to-let sector.
Rental yields are the main gauge of buy-to-let profitability and at 4.8%, outer London is home to the lowest average yield of all regions. Inner London doesn’t fare much better at 5%, the second-lowest average yield of all regions along with the South West.
While the higher cost of investing may dent yields, the average rent earned per month is still by far the highest in inner and outer London at £2,453 and £1,697 respectively. With the East of England, South East and South West the only other regions to see rental income tip over £1,000 a month on average.
The average landlord in inner London has an average portfolio of 7.7 properties, climbing to 7.9 properties in outer London. While this is lower than landlords in the South East, Yorkshire and the Humber, North East and North West, there is a clear winner where the value of these portfolios is concerned.
In inner London, the average buy-to-let portfolio is worth an impressive £4.5m on average, by far the highest of any region. In outer London, this drops to an average of £3.3m but remains considerably higher than any other region.
Of course, many landlords rely on a buy-to-let mortgage to finance their portfolio. The figures show that in inner London the total amount owed per landlord through buy-to-let mortgage borrowing is £1.1m, falling to £811,000 in outer London.
This equates to just 24% of the average buy-to-let portfolio value in both areas, with London landlords owing the smallest proportion of their portfolio value of all areas other than the South East.
There is another huge benefit when investing in a London buy-to-let. In the last year, just 28% of landlords in inner London saw their tenants fall into rental arrears, the lowest of all regions. In outer London, this figure also remains under 40% but was higher than the East of England, South East and South West.
However, over the last three months, this figure falls to 31% in outer London. Along with the South West, this is the lowest level of arrears of all regions other than inner London, where just 24% of landlords have experienced arrears.
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Average yield, house price and rent
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Location
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Average rental yield
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Average house price (Q1 2020)
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Average rent earned per month
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North West
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6.30%
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£165,714
|
£870
|
|
East Midlands
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5.70%
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£194,933
|
£926
|
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Yorkshire and the Humber
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5.50%
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£163,093
|
£748
|
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East of England
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5.20%
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£291,021
|
£1,261
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North East
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5.20%
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£127,704
|
£553
|
|
South East
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5.20%
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£322,863
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£1,399
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West Midlands
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5.10%
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£187,758
|
£798
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London – Inner
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5.00%
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£588,698
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£2,453
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South West
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5.00%
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£259,891
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£1,083
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London – Outer
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4.80%
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£424,172
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£1,697
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Average portfolio size and value
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Location
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Properties in the average portfolio
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Average house price (Q1 2020)
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Average value of portfolio
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London – Inner
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7.7
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£588,698
|
£4,532,971
|
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London – Outer
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7.9
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£424,172
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£3,350,957
|
|
South East
|
8.1
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£322,863
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£2,615,189
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East of England
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6.4
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£291,021
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£1,862,533
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Yorkshire and the Humber
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11.0
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£163,093
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£1,794,021
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South West
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6.5
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£259,891
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£1,689,293
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North East
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13.1
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£127,704
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£1,672,919
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North West
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8.8
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£165,714
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£1,458,284
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East Midlands
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7.4
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£194,933
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£1,442,506
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West Midlands
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7.6
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£187,758
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£1,426,964
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Average number of buy-to-let loans held, total amount owed and percentage of owed amount of total portfolio
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Location
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Average number of BTL loans held
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Total amount owed through BTL mortgage borrowing
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North East
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8.3
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£720,000
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43%
|
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North West
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8.4
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£559,000
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38%
|
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West Midlands
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5.2
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£523,000
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37%
|
|
East Midlands
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5.0
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£515,000
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36%
|
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Yorkshire and the Humber
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7.7
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£581,000
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32%
|
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East of England
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4.7
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£533,000
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29%
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South West
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5.2
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£438,000
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26%
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London – Inner
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5.9
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£1,100,000
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24%
|
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London – Outer
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5.1
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£811,000
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24%
|
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South East
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5.3
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£583,000
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22%
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Rental arrears and void periods
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Location
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Arrears last year
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Arrears 3 months
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Yorkshire and the Humber
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42%
|
55%
|
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North West
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50%
|
46%
|
|
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North East
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60%
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45%
|
|
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East Midlands
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41%
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43%
|
|
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West Midlands
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42%
|
39%
|
|
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East of England
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37%
|
36%
|
|
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South East
|
36%
|
33%
|
|
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London – Outer
|
39%
|
31%
|
|
|
South West
|
32%
|
31%
|
|
|
London – Inner
|
28%
|
24%
|
|
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