I was at a recent business networking event in Camberwell, where we discussed where the next hot spot town or city was to invest.    Now it can be tempting just to look at Camberwell alone when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive vs capital growth so it’s worth reviewing other locations in the country.

Regular readers of my Camberwell Property Blog know of my love of the ‘buy to let seesaw’.  On one side of the seesaw is yield and on the other is capital growth.   Landlords should be looking for a sufficient rental yield so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell.  However, high yielding property in say such areas as the Crawford Estate in Camberwell, will suffer from lower capital growth.  The relationship works in reverse as well, so in such upmarket areas as Camberwell Grove Conservation Area, properties offer good capital growth, but at the expense of a decent yield.

The North East and North West of the UK are landlord magnets for great yields.  The average yield in Camberwell today is 4.23%, when you compare this with Hartlepool in the North East (7.73%) or the Anfield area of Liverpool (9.43%), it doesn’t look too healthy.   Now, of course, these are only averages, and some of my Camberwell landlords are achieving 5% to 6% on some of their properties, but this might be at the expense of capital growth.   Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1/M6 to the Home of the ‘The Reds’,  that Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped by 1.4%.

When you compare the long term house price growth, it gets even worse.  Looking at the long term increase since 1995 property values in Camberwell have risen by 398.4%, compared with Hartlepool at 21.02% and Liverpool at 90.11%.  It just shows you shouldn’t always chase high yields because of the risk of poor capital growth.  As I always like to explain to landlords you need to have a clear strategy and balance yield against capital growth when making your investment plans.  You need to stress test against higher mortgage rates to ensure you have a positive cash flow when interest rates change.  Finally, when you come to sell your buy to let property it you should make a decent profit if you have planned your strategy correctly.