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As the number of households moving into rental accommodation increases, the case for residential investment remains compelling.

Despite the squeezed margins following last year’s 3% stamp duty surcharge, statistics show that there were still 59,000 purchases of residential investment properties and second homes in the third quarter of 2016.

OnTheMarket.com’s data – analysed by Savills – shows there are rental returns of more than 6% to be had on a two bed property in Newcastle, Sheffield and Merseyside as at January, 2017.

The table below shows the average yield for a two bed property across major cities in England and Wales:

Ian Springett, Chief Executive of OnTheMarket.com said: “The rental yield on two bedroom properties in the North West is almost double the yield generated within central London. Buy-to-let investors who focus on the UK’s northern cities will benefit from the large student populations who attend well-established universities and a low point of entry to market in terms of capital.”

Meanwhile, Lucian Cook, Head of Residential Research at Savills, expressed caution. He said: “Be mindful of tax changes and tighter mortgage regulation to come, notably the phased withdrawal of income tax relief on mortgage interest payments. Mortgage regulation will stress test affordability at much higher mortgage interest cover ratios, reducing the amount of debt investors can take on.”

Content provided by OnTheMarket.com is for information purposes only. Independent and professional advice should be taken before buying, selling, letting or renting property, or buying financial products.

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