tmbl_NeezamNeezam Romjon, Senior Mortgage Adviser at The Mortgage Broker LTD, offers his advice on a number of common questions and situations his clients face.

Which Postcode Areas are Best for Buy to Let?

New research has shown that some postcode areas are outperforming others in terms of buy-to-let properties. Capital gains and rental yield were just two of the elements considered in the research by LendInvest. Rental price growth was another key factor.

The research has also shown which areas are bottom in the buy-to-let postcode league tables. Before we look at those, let’s focus on the areas would-be landlords should be considering in the current marketplace.

Luton is the best area to go for

It remains to be seen how long this will last for, particularly if landlords flood the market in the area given this research. However, Luton currently offers an average yield of 4.54%, with capital gains of 12.83%. The rental price growth seen in the area currently amounts to 7.37%.

Stevenage comes in second, with a lower yield of 4.05% and a lower capital gains of 11.64%, but a higher rental price growth percentage of 7.47%. The figures gleaned from the research are taken together to present the overall standing of an area.

The rest of the top five is completed by Rochester in Kent, Colchester in Essex, and Dartford, also in Kent. From there, the top 10 is completed with the following areas:

  • Peterborough
  • Southend-on-Sea
  • Manchester
  • Canterbury
  • Romford

So, we have yet another Kent area there, plus another in Essex. Interestingly, Romford in Essex was previously in first place, but has since suffered a drop in both rental yields and capital gains.

“Strongly-performing areas”

“The new data shows which postcodes landlords should currently be interested in if they are looking to invest in property,” says Darren Pescod, managing director of The Mortgage Broker Ltd. “Strongly-performing areas will always change, as we have seen with Romford, but the overall data can give landlords a better idea of which areas look to be more profitable than others. It can also help them avoid underperforming areas more easily.”

The bottom 10 postcodes

As for the worst-performing postcodes, these are Sunderland, Lancaster, Darlington, Preston, Llandudno, Plymouth, Western Central London, North West London, West London, and Galashiels. Three entries for London postcodes might surprise some, but Western Central London saw yields of 3.75% and capital gains of just 3.18%. Meanwhile, North West London was in a similar position, with a 3.70% yield and a slightly better capital gains figure of 3.84%. West London’s figures were a stark contrast even to those, with a yield of 2.94% against capital gains of just 1.74%. Galashiels, coming in last, had a yield of 3.98% against capital gains of a mere 1.60%.

Of course, the picture can and does change frequently. This may be particularly true if landlords make their decisions based on this data. It may encourage some to avoid the worst-performing areas to concentrate on the better ones. Additionally, it is best to put your money in the best places if you can. No doubt some landlords will act on this data to try and make the most of their buy-to-let portfolio.