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Buy-to-let investors 'better off' in the South

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Despite the attraction of lower house prices in the north, buy-to-let investors are better off ploughing their cash into properties in the south, claims a leading expert in the housing market.

It was revealed today (November 13th) by SmartNewHomes that property prices in London were up 14 per cent on the 12 months leading up to the end of October, while the average price of a home in the north actually fell by 0.3 per cent last month, when compared with the previous year.

The National Housing Federation (NHF) recently reported that the average house in the north-east is now £126,000, considerably below the national average, as reported by Nationwide, of £169,623 for October 2006.

Such low prices have prompted some investors to look north for the best returns on their invested cash but Kelvin Davidson, property economist for Capital Economics, was cautious at the proposition that a move up north would be profitable for first-time buyers and buy-to-let investors alike.

"As long as the employment is there then I guess it makes sense. But having said that you've got to look at some of the affordability measures, and some of the areas up north are not that affordable," he said.

Even though there are gains to be made on capital investment in the north, the overall picture for those hankering for a buy-to-let investment might not be so rosy.

In the context of vast swathes of immigrants coming from the new members of the European Union, such as Poland, Bulgaria and Romania, Mr Davidson added: "[The South] has historically had more favourable demographics and even now most of the immigration in the UK starts in London.

"So you've got support, at least from the rental sector, for a start, which supports buy-to-let and by extension house-prices. But eventually they may find it cheaper to move up north."

Although the north may be a long term prospect for buy-to-let investors, the region currently does not have the economic strength to support lucrative rental yields for return-hungry investors.

Indeed, the NHF claims that the number of people in search of affordable homes in the north-east has now become endemic; since 2001, the number of households on housing waiting lists has increased by 44 per cent and now stands in excess of 90,000.

Such a demographic is unlikely to provide the buy-to-let investor with the rental yield needed to cover a mortgage or supply surplus cash for investment elsewhere.

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