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Buy-to-Let Investors Turn to Northern Hotspots for Higher Yields Amid Market Shifts

In a quest for better returns, buy-to-let investors are increasingly setting their sights on northern areas like Hartlepool and Liverpool. This strategic shift, highlighted in research from London-based estate and lettings agent Benham and Reeves, is a response to the challenges posed by high mortgage rates and declining house prices.

Nationally, the purchase of second homes has seen a significant uptick, with a 19.5% increase in transactions from 230,900 between April 2020 and April 2021 to 275,900 in the following year, as the UK emerged from the pandemic.

Notably, the North East experienced a 27% surge in additional dwelling purchases, jumping from 11,500 to 15,000 between the two financial years. Similarly, the North West saw a 26% rise, from 34,400 to 41,900 in the same period.

Liverpool and Manchester particularly stood out, with Liverpool seeing a 37% increase in additional home purchases, and Manchester recording a 39% rise.

Marc von Grundherr, Director of Benham and Reeves, observes, “Making strong returns as a second home investor is no longer a guarantee, so it appears that more are prepared to look further afield by purchasing homes in the regions where yields are stronger due to the lower initial cost of purchasing a property.”

Von Grundherr adds, “Liverpool and Manchester have been popular for some time though growing interest in North-Eastern towns like Hartlepool and Middlesbrough has been aided by low house prices.”

He also notes that for those seeking second homes for personal use, the allure of the North’s natural beauty is a significant factor. While the South East and London continue to attract investment due to their potential for capital growth, the overall market dynamics are evolving.

In a related development, Propertymark has raised concerns over the Scottish Government’s proposal to permit local authorities to double council tax rates on second homes not used as a main residence. The Scottish Parliament will soon debate regulations that could enable councils to impose a council tax premium on such properties.

Timothy Douglas, Head of Policy and Campaigns at Propertymark, recommends that the Scottish Government learn from the Welsh Government’s experiences and explore alternative strategies to address the second home issue, suggesting, “We recommend that the Scottish Government take the lessons learnt from the decisions made by the Welsh Government and to consider alternative ways to incentivise the reduction of second homes.”