Is buy-to-let in Hull still a good idea?
Gone are the days when buy-to-let was an ‘easy’ way to supplement your income, increase your wealth or boost your pension pot.
Yet recent research from UK Finance suggests Hull is one city that’s bucking the national trend – and experiencing strong growth in buy-to-let lending.
But before we look into Hull’s success, let’s look at why this investment strategy is no longer the darling it once was for other areas of the UK.
Buy-to-let properties in Hull buck national trend
Rightly or wrongly, buy-to-let investors have received heavy criticism in recent years for limiting the amount of UK housing stock available as homes.
Consequently, the Government has increased the amount of legislation you must abide by before you can become a landlord.
In 2016, the introduction of a 3% stamp duty surcharge on second properties made buying a property to rent out a much less attractive investment choice.
The following year, a reduction in the amount of mortgage interest relief that landlords could claim came as another hammer blow.
Recently, the introduction of new ‘stress-test’ requirements by the Prudential Regulation Authority (PRA) has made life even harder – with most banks increasing their rental cover requirement to 145% of the mortgage payments instead of the previous 125%.
As a result, most lenders are only willing to issue buy-to-let mortgages with a maximum 75% loan-to-value ratio.
Unfortunately, rents are not high enough in most parts of the UK to facilitate this level of borrowing – unless you invest here in Hull.
According to statistics from UK Finance, buy-to-let lending soared in Hull by 12.8% during 2018 - driven by low house prices, a healthy local economy and strong demand for rental properties.
Positively, this allowed Hull landlords to buck the national trend and achieve much higher yields than the UK average.
Why has Hull experienced strong growth in buy-to-let lending?
From a landlord’s perspective, Hull is a relatively safe place to invest – especially when compared to other areas of the UK.
Nationally, the average price for a property is £230,292.
In Hull, the average property cost £141,178 in August 2019 – almost 40% lower!
Compared to 2018, this was a slight increase of 0.60% and prices in some areas are still on the rise.
As a result, there’s a good chance that a buy-to-let property in Hull will eventually provide an excellent return in three key areas:
· Yield (return on investment)
· Capital gains
· Rental price growth
Choose the right buy-to-let property (in the right location) and you could easily benefit from a realistic annual yield of between six to eight per cent.
The areas where this level of return is currently achievable with buy-to-let properties in Hull include:
· HU5 - The Avenues, Beverley Road, Cottingham Road, Bricknell Avenue
· HU4 - Anlaby Road, Gipsyville, Hessle Road, Boothferry Road
· HU8 - Holderness Road, Stoneferry, Garden Village, Ings Road Estate, Longhill, Sutton, Howdale Road
If you can find a property for below market value and add a stylish new bathroom or kitchen, you could achieve as much as 10% yield (before tax) in some areas.
Not a bad return, if you’re willing to negotiate your way carefully through all the taxation and legislation requirements.
So, is buy-to-let a good idea in Hull?
Ever since the first buy-to-let mortgage was introduced in 1996, London has led the way in the buy-to-let stakes.
But with rents rising fastest outside the capital and the affordability ceiling reached in London, landlords are now far more discerning about their investment decisions.
Because of the relatively low house prices and more attractive yields on offer in the North, the buy-to-let market is definitely beginning to experience a geographical swing away from the capital.
Having analysed our property sales data, we believe Hull is benefitting from this trend – fuelled in part by the impact of the Government’s tougher legislation
Whether you’re new to buy-to-let properties in Hull or already have a portfolio, it’s still relatively easy to find a suitable (and affordable) property here in our home city – because it’s an area full of diverse stock.
Both Hull and its surrounding suburbs in the East Riding boast some excellent opportunities for landlords – including flats, family homes and houses of multiple occupation (HMO).
Thanks to the healthy yields possible and a high demand for rental properties, we frequently field enquiries from landlords looking to invest in buy-to-let in Hull. Some of these are from out of town, others are homegrown investors who appreciate exactly what the East Yorkshire region has to offer.
With £30m set to be invested in Hull to promote its rich maritime history and make it an attractive visitor destination, we only expect this interest to grow in the future.
Contact our Hull buy-to-let experts
If you need help finding a buy-to-let property in Hull or would benefit from some expert advice about the city’s rental market, get in touch or call 01482 566057 now!