Tower Hamlets offers the fastest return on buy-to-let investment in London, a new report has found.
The report, commissioned by the estate and letting agent Benham and Reeves, looked at the cost of buy-to-let stamp duty plus average house price and annual rent to know the number of years that it would take to recoup the cost of buying property in each area of the UK.
Marc von Grundherr, director of Benham and Reeves, said: “While a buy-to-let investment includes all sorts of additional concerns such as contingency budgets, capital growth and so on, we wanted to highlight on a more digestible level where offers a good investment option when it comes to recouping the cost of that investment via your rental income.”
The research ranked Tower Hamlets as the borough in London with the quickest return, with annual rental income taking 21.4 years to recoup the average house price and stamp duty costs of £452,821 with an average annual rent of £21,144.
The next best options in the capital are Barking and Dagenham with 22 years, Newham with 23 years, Greenwich with 23,5 years and Enfield with 25,7 years. The worst option is the City of London, where it takes 35 years to recoup the buy-to-let investment of £919,484 on an average annual rent of £26,268.
London ranks low amongst the cities in the UK to see rental income recoup the cost of buying a property, taking 24.3 years to recoup on an average annual rent of £20,148. Cambridge has the longest return with 31.4 years to recoup the buy-to-let inversion of £461,155.
Glasgow is the city in the UK with the quickest return with 13.3 years to recoup £134,954, followed by Belfast with 15.8 years and Aberdeen with 17.8 years. In England, Nottingham is the fastest area at 18.4 years, followed by Newcastle at 18.5 years.
It is no surprise that the top three ranking cities come from Scotland and Northern Ireland, as those are the countries in the UK with the quickest return. In Scotland, the average annual rent returns the original asking price of £155,528 in 17.7 years. Northern Ireland was the second quickest at 18.9 years and Wales the slowest at 26.4 years.
In England, it takes 25 years to recoup the average house price and stamp duty costs of £252,784 with an average annual rent of £10,128.
Von Grundherr said: “What this research demonstrates is that while buy-to-let remains a lucrative business despite the government’s attempts, it should be viewed as a long-term one and not a method for making a quick buck.
“For those serious about the sector whether it be as a professional or amateur landlord, it’s important to understand the commitment before diving in if you wish to see a profit.”