For years, London stood as the cornerstone of property investment in the UK. However, recent trends indicate a significant change in the property landscape. An overwhelming majority of London-based landlords—around two-thirds, to be precise—who ventured into new property investments this year have turned their eyes away from the capital. Instead, they’re exploring the rich potentials that lie in other regions of the country.

This shift in investment focus is largely due to the stagnation in London’s property prices, compounded by the highest interest rates seen in 15 years. Despite a record growth in rentals, the diminishing prospects of property value appreciation and lower rental yields—currently the lowest in the country at 5.6%—are pushing investors to look elsewhere.

The Northern Magnet

The North of England has emerged as the new darling for property investors, now accounting for 24% of all purchases made by erstwhile London-focused landlords. This surge is a significant leap from the meager 1% recorded just a decade ago.

Why this sudden northern charm? The answer lies in the promise of higher profit margins due to the North’s more affordable property prices. These competitive prices mean that investors can expect a higher rental yield for their investments. For instance, rentals in the North East are boasting the highest yield of any region, an impressive 9.1%.

Aneisha Beveridge, head of research at real estate agency Hamptons, points out that recent tax changes have dampened profits in the rental market, prompting investors to hunt for more rewarding deals, which they’re finding up North. The potential returns in these regions are significantly more attainable and appealing, especially for landlords utilizing mortgages to finance buy-to-let properties.

Stretching the Investment Pound

The stark difference in market conditions between London and the North means that an investor’s pound travels much further up North. For example, an investor with £100,000 could potentially purchase multiple properties in certain parts of the North, a feat unachievable in the South, particularly in London.

This disparity is not just a matter of stretching capital but also about the growth potential. “We’ve observed a quick escalation in London house prices until 2015, followed by a period of stagnation. Conversely, in the North, prices have been on an upward trajectory. Investors in the North have essentially hit the investment jackpot over the last seven to eight years,” explains Ms. Beveridge.

Ripple Effects of the Northern Shift

This migratory trend of landlords has several implications. In London, a reduced number of buy-to-let investors might lead to a tighter rental market. Conversely, tenants in the North are likely to enjoy a wider array of rental options, thanks to the increased investment in the local property market.

Moreover, landlords who are open to higher-risk investments by venturing into less affluent areas could reap even larger rewards. Some locations in the North East, still reeling from the 2008 financial crisis with property prices at a low, present high-yield opportunities. “These towns, with a high proportion of renting locals, offer attractive investment returns,” says Ms. Beveridge.

Particularly, areas like County Durham, encompassing Darlington and Hull, are cited as gold mines for buy-to-let investors, promising some of the most attractive yields nationally.