Cities named 'buy-to-let' hotspots
Southampton, Blackpool and Hull have been named as the country's top "buy-to-let hotspots" for landlords looking to make good returns on their investments.
Due to its relatively affordable houses and average rents of £901 per month, Southampton topped the list compiled by HSBC of the best places for investors to put their cash. Average property prices in Southampton are around £138,000, meaning that the average rental yield that an investor can expect to make is around 7.82%.
Blackpool came in second place, with its glittering Golden Mile, seaside views and popularity with tourists looking for holiday rentals and seasonal workers. Average rents in the town stand at £494 a month, delivering a rental yield to investors of around 7.81%.
The rental yield on a property is the annual return that an investor can expect to make on it. It is worked out by calculating a year's rental income as a percentage of how much the rental property cost in the first place.
With their relatively cheap property prices, northern towns and cities dominated the top of the list. Hull, with its large student population, came in third position and Manchester was in fourth place.
There has recently been renewed interest in the buy-to-let sector, which has provided some decent returns at a time when savers are struggling to make any real money on their cash pots amid low interest rates.
Rents have soared in some regions over the last year amid strong demand in the sector and there have also been signs of lenders expanding their buy-to-let deals to meet the increased interest from investors.
Peter Dockar, head of mortgages at HSBC, said: "Buy-to-let remains a good investment for those looking for above-average returns. Twenty-three of the top 50 areas offer yields above 5%, significantly more than is available from more traditional savings options.
"However, it is clear there is a fine line between a property in a desirable area, the rents that can be achieved and the returns that can be yielded, so it is key landlords do their research as often the most popular locations may not offer the best return."
Despite the high rents charged in London, the capital did not score particularly highly in terms of the returns that investors can make because property prices are also high. Southwark produced the best returns out of the areas studied, at 6.15%.