Landlords enticed by the potential of substantial profits are leaving London in droves and heading to Blackpool.
The seaside resort is seeing rental yields skyrocket into double digits, nearly twice what investors can expect to earn in the capital. Hamptons estate agency data reveals a significant increase in the proportion of homes in Blackpool bought by Londoners, rising from 4% in 2019 to 9% this year.
The majority of these new buyers are snapping up investment properties, aiming to maximise both high rental income and affordable property prices. In contrast, buy-to-let investment in the South East has been on a steady decline over the past decade due to soaring house prices.
As of 2014, almost half of all buy-to-let purchases in the UK – 46 % – were in London and the South East, reports the Express. This figure has now dropped to just 32%, while the proportion of landlord purchases in regions including the North West, North East, and Yorkshire and Humber has increased by 13 points.
Blackpool offers a distinct advantage for landlords when it comes to stamp duty, where they will pay an average of £6,816. In London, the average payment is a staggering £46,633, even before the additional surcharges for second homes and buy-to-let properties are applied, according to buy-to-let bank Paragon.
This vast disparity seems to be driving more London investors towards the Lancashire town. Stephen Bagdoans, a managing agent at Blackpool-based Kenricks Commercial, explained to the Telegraph the economic dynamics affecting the area.
He said: “It’s simple supply and demand. Yields are going up because the Government has been cracking down on landlords. If you’re being hit by a stick, you move out of the way.”
Buy-to-let landlords are apparently swapping London for Blackpool
In addition the area is attracting fresh investment, with several government offices relocating there, with public sector workers demanding higher-end properties.
Mr Bagdoans added: “The council makes sure properties are up to standard and decent. It’s one of the reasons why we have such a high quality of rental accommodation in the area,” he said. “Around half of the properties we manage are privately let, while the rest are let to social tenants.”
Bruce Haagensen, the CEO of Newcastle-based advisory service GB Landlords, added: “Blackpool is the big Bed & Breakfast benefits capital of the North West. It’s a traditional seaside holiday resort where a lot of hotels and boarding houses have been converted into homes for benefit claimants.”
Referring to relatively low property prices, he added: “London landlords look at the numbers, not the locations. They see that what they can buy for their money in Blackpool is much more than what they could get for the same amount in London.”
Nationally, the average rental yield for buy-to-let properties is currently 6.7%, based on a typical property value of £343,356 and rental income of £23,076. However, Blackpool significantly exceeds this, with some properties offering annual near to 10%.
Nevertheless, Louisa Sedgwick, mortgage director at Paragon, sounded a note of caution. She stressed: “Yields provide a snapshot of a property’s income generation potential, but they don’t reflect factors like capital appreciation, improvements in rental income from property upgrades, or the impact of leverage for landlords who use a mortgage to buy property.”
In addition to these factors, landlords also need to consider other operating costs, including management fees and stamp duty.
Ms Sedgwick added: “Assessing return on investment provides a more complete picture. A key consideration for landlords is the loan-to-value ratio. Typically, landlords will put down at least 25% as a deposit, which not only secures lower mortgage rates but also means that a property’s return on investment is based on the initial deposit outlay.”
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