Investors selling in the South, buying in the North

Tax and regulatory changes over the last few years have put pressure on landords owning lower yielding properties. Many are addressing the issue by selling up and buying in the North.

The race for space continues to drive the volume of transactions - and prices - ever upwards. In part, the supply of properties has come from landlords taking their profit and selling into a bouyant market.

However, recent research by Hamptons suggests that many landlords are not exiting the sector - they are redeploying their funds into higher yielding properties.

Tax changes have put pressure on investors owning lower yielding properties. In addition, lenders will typically offer lower mortgages and their stress tests become more difficult to meet. For many, the solution is high yield properties.

Hamptons' analysis shows that the yiield on buy to lets sold last year averaged 5.2%. The average yield on those bought was 6.2%. More than 50% of the properties bought last year yield 5% or above, compared with just 35% the previous year.

The properties achieving these numbers tend to be within two groups. The first is smaller properties, which have historically shown higher yields. The second group is properties away from the South East, in particular, Northern England. Many, of course, fall into both groups.

Newly purchased buy to lets in the South East offered yields averaging 4%, whereas those in Northern England were reaching 7%.