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Buy-to-let hotspots – where are yields climbing despite the pandemic lockdown?

Despite the ongoing coronavirus pandemic disrupting pretty much every aspect of daily life, the latest research from lettings management platform Howsy has revealed the pockets of the UK rental market that are currently registering the strongest yields.

Meanwhile, there are those that have seen yields grow despite the Covid-19 crisis. You can see the data on the ‘best and biggest increases’ here.

Howsy’s figures reveal that the current average UK rental yield sits at 3.5%, having seen a very slight fall from the 3.6% registered prior to the outbreak first hitting in China in late December of last year.  

Nevertheless, even with the obstacles that the current landscape is providing, there are still a number of buy-to-let pockets providing strong returns for landlords who want to invest in property.  

Bradford leads the way

The data found that Bradford is home to the highest average yield at 10%, far better than the UK average, with Gwynedd (6.2%) and North Down (6%) also home to an average yield of 6% or more. 

Elsewhere, Glasgow, Liverpool, Preston, West Dunbartonshire, North Lanarkshire, Forest Heath and Manchester also rank high.

By contrast, Kensington and Chelsea, Malvern Hills and Chiltern – all places where initial investment is very likely to be high - are home to the UK’s worst average yields at 2.3%. 

In spite of the issues posed by the current pandemic, predictions of house prices falling while rental demand remains high could mean a rise in yields, Howsy says, as the investment cost to return ratio becomes more favourable.  

Even before this materialises, though, there are parts of the UK buy-to-let market that have already witnessed yields increase since November.

The largest has been in North West Leicestershire, where yields are up 1.4% since the coronavirus crisis took hold. Arun, Corby and West Norfolk have also experienced an uplift of 0.8% in rental yields, with North Dorset and Newark and Sherwood seeing a 0.7% increase. The rest of the top 10 for the largest pandemic rental yield uplifts is completed by Kettering, Derby, Breckland and Falkirk.

At the other end of the scale, Rhondda Cynon Taf, York, Gedling, Chiltern and the Vale of Glamorgan have seen the biggest drops of between 1%-3.5%. 

“The current lockdown has seen the government introduce measures such as buy-to-let mortgage holidays and a ban on tenant evictions and this has understandably caused many buy-to-let investors to hesitate,” Calum Brannan, founder and chief executive of Howsy, said.

“But despite this overall air of market uncertainty, tenants still need to find rental properties and so it continues to be business as usual for many landlords and those agents who have adapted to a more digital mode of operations.”  

He added: “There’s also still a large number of areas where potential and existing landlords can secure favourable yields much higher than the national average, with some areas still seeing an uplift in yields despite the spread of the coronavirus.”

Brannan said that, as the nationwide lockdown continues to drag on, there may be another silver lining for buy-to-let investors.

“Should the property market see prices fall, the cost of investing will be lower, boosting profit margins in a sector that has had it tough of late due to government squeezes on profitability.”

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