The cities of Liverpool and Nottingham are the best performing property investment locations in the U.K., according to a report released Thursday evening by Private Finance, London-based independent mortgage advisors.
Both cities logged average rental yields of 6.2% so far in 2018, once mortgage costs are taken into account, the report said, leaving them tied for the best buy-to-let performance among the 50 U.K. towns and cities Private Finance analyzed.
Despite a drop of 1.8% in rental yields due to falling rental prices in the area, Liverpool has retained its top place position since May 2017. Nottingham moved up from second position thanks to a £121 (US$172), or 0.6%, increase in average monthly rents over the same time period.
The third best performing area is Cardiff, the capital and largest city in Wales, with average yields of 6.0%, the report said.
Rental yields in the top 10 hotspots rose by an average of 0.9% since May 2017, according to the report. Southampton, on the south coast, experienced the biggest increase, of 2.2%, as rents in the city rise faster than house prices.
In other good news for landlords, many will have seen their annual mortgage costs fall, with the average two-year buy-to-let fixed rate mortgage at its lowest point (2.47%) since tracking began in January 2012, according to Bank of England data. This is despite November’s interest rate rise, the first seen in the U.K. in 10 years.
“Finding the right buy-to-let location is a careful balancing act,” said Shaun Church, director of Private Finance in the report.Too large an initial investment makes it difficult to achieve a healthy yield, but landlords must also be confident that property values will appreciate at a higher rate than mortgage borrowing to achieve a long-term profit.“