Sheffield Buy To Let Yields of 4.62% â€“ Should you look over the Pennines?
I was at a recent business networking event in Sheffield, when a landlord (who it transpired had a couple of Buy to let properties) bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Sheffield when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.
Now regular readers of my articles of the Sheffield Property Blog know of my love of the â€˜buy to let seesawâ€™. On one side of the seesaw is yield and the other capital growth. Landlords should be looking for a high rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as Parson Cross and Grimesthorpe in Sheffield, (so the seesaw arm with yield on it goes up on one side), will suffer from low capital growth (so the other arm with capital growth on the seesaw goes down).Â The relationship works in reverse as well, so in such upmarket areas as Dore and Ecclesall, properties offer good capital growth, but at the expense of a decent yield. Â
The North East and North West of the UK are landlord magnets for great yields. The average yield in Sheffield today is 4.62%, which when you compare with say Hartlepool in the North East, which achieves 7.73% or Â 9.43% in the Anfield area of Liverpool, doesnâ€™t look too healthy. Now of course, these are only averages and some of my Sheffield landlords are achieving 7% to 9% on some of their Sheffield properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1/M62 to the Home of the â€˜The Redsâ€™,Â that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.
//cloud.highcharts.com/embed/ynyfifWhen you compare the long term house price growth, it gets even worse. Looking at the graph, Since 1995, property values in Sheffield have risen by 137.95%,compared with Hartlepool at 21.02% and Liverpool Â at 90.11% â€“ it just shows you shouldnâ€™t always chase the yield because of the poor increases in property values in those two places. As I always like to explain to landlords when they either email me, pick up the phone or pop into my offices for a coffee (both my own and even landlords who use other agents (you are all welcome at ours), together with soon to be FTLâ€™s (first time landlords)), a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.
At the end of the day, as a Sheffield landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment.