Expat investors head north for buy to let bargains

For expats looking to live well from UK buy-to-let properties, research into the best regions for returns is now essential.

With increasing house prices, increased stamp duty and the recent crackdown on tax all squeezing landlords’ profits, expats wanting to take advantage of the fall in sterling to make a buy-to-let investment need to find areas where house prices are low and rents offer adequate returns. Landlords tempted to buy London properties should think again, as soaring prices have narrowed returns to an unacceptable level.

Recent research has identified Liverpool as the best location on offer as regards price versus returns, with average annual incomes now equivalent to 12.63 per cent. Prices in the city are remaining low and the city is home to three major universities, ensuring occupation through regular high demand.

Other university towns with inexpensive house prices include Manchester, Sheffield, Cardiff, Glasgow, Nottingham and Plymouth, all regarded as buy-to-let hotspots delivering over 10 per cent returns. In contrast, landlords in London as well as most areas in the Southeast of England are finding decent returns a thing of the past due to sky-high house prices and a dwindling number of tenants able to afford rent increases.

In most cases, landlords in London are having to wait years before covering costs and realising decent profits. Average returns are around 2.36 per annum, and are likely to be swallowed up by maintenance costs and long vacancy periods. Worst of all, landlords are now forced to pay income tax on full rental incomes rather than on profits.

Major estate agencies believe the present situation may signal the end of the buy-to-let dream for most investors, with one estimating landlord purchases will drop by at least a quarter by 2022. If they’re right, a fall in house prices within the sector is an unavoidable response and will cause a glut on the market.

For expat professionals who’ve successfully ridden sterling’s collapsing wave and bought bargain properties using foreign currency savings, making a profit on the original cost should be possible, but where new investors’ cash goes in future is anyone’s guess.