UK housing market has been booming to say the least as we bounce back from the pandemic woes. Many had predicted a market crash or some sort initially at the start of the pandemic but the government had other ideas. Considering the UK tops the list of tax income from property industry and the industry overall contribution to macro-economy amongst the G7 countries, it only makes sense that the government will do everything to keep the industry booming to keep the economy going. This market was fuelled by the stamp duty holiday as well as first time buyer 5% deposit scheme as per the government's plan. We saw the ever rising asking prices and the time it takes to complete the sale was also significantly shortened. The conveyancers we spoke to have informed us that they had been extremely busy where they had to work overtime to keep the clients happy.
We don't know whether the market's record-breaking prices and transaction levels will continue into 2021, but one thing is certain: the market will go in either direction. For investors, the question will be, more than ever, where are the top cities and towns to invest in 2021 due to shifts in priorities transforming the landscape of demand across the UK.
In this blog-post, we take a look at the top 10 places to invest in the UK analysing trends and data from multiple key sources including JLL and Zoopla, taking account of top areas for both past and forecasted rental yields and capital growth.
Where are the best UK property investment areas for B2Ls?
Before we jump into talking about the best areas to invest in the UK, we first need to understand what metrics we use to analyse and evaluate the investment opportunities. The key metrics we use are-
Property Prices – Rental Yields – Tenant Demand – Population – Regeneration – Career Opportunities – Tenant Demographics – BTL Opportunities – Transport Links
1.Birmingham
Average Price: £202,162
Average Rental Yield: 5.4%
Price Growth in Five Years: 14.2%
Birmingham has had a strong run for the past five years and it is at the top once again as the best place to invest in the UK. Average rents have gone up by 30% over the last 10 years and are expected to rise by 15.9% over the next few years.
Tenant demand and populations tend to go hand to hand and the good news is that Birmingham's population is expected to hit 1.24 million by 2030. In terms of transport link we have a midlands metro extension and other investment projects such as HS2 and Common wealth game 2022.
2. Manchester
Average Price: £242,311
Average Rental Yield: 5.37%
Price Growth in Five Years: 15.76%
Manchester, a true Northern powerhouse in terms of property, continues to gain traction as a top investment destination, with house prices projected to rise another 17.1 percent, according to JLL.
The city is now the #1 choice for young professionals in the North West, thanks to a plethora of career options in worldwide corporations and an 84 percent increase in employment between 2002 and 2015.
Manchester shows no signs of slowing down, with the Great North Rail project set to begin in 2022, allowing 40,000 more people to commute throughout the North's major cities
3. Liverpool
Average Price: £186,527
Average Rental Yield: 5.30%
Price Growth in Five Years: 8.45%
Liverpool, another popular North West hotspot for renters, has some of the highest yielding postcodes in the country – L1, also known as the Baltic Triangle, is one of Liverpool's trendiest areas to live and has previously delivered 8.1 percent annual rental yields, while L7 has previously delivered ten percent annual rental yields.
While prices haven't risen as quickly as in Birmingham or Manchester, JLL anticipates a 13.1% increase over the next four years, fuelled no doubt by the £5.5 billion Liverpool Waters project, which will create 17,000 jobs and new public spaces. Liverpool is great for people seeking a lower price point in terms of affordability.
4. Nottingham
Average Price: £214,435
Average Rental Yield: 4.66%
Price Growth in Five Years: 16.92%
Nottingham has made great progress in recent years and currently represents a key investment destination, being more affordable than Manchester but on par with Birmingham in terms of price. Small parts of the city, like Liverpool, have high yields of approximately 9%, such as the NG1 postcode in the city center and NG7, which is home to the University of Nottingham - though this has slowed since lock-down.
With two major universities close to the city center and the Queens Medical Centre — a ‘super hospital' with 6,000 medical professionals – Nottingham's demand continues to grow.
5. Newcastle
Average Price: £198,307
Average Rental Yield: 6.5%
Price Growth in Five Years: 6.2%
Newcastle, the UK's eighth largest city, leads the way for investment in the North East of England. Newcastle is one of the most affordable cities in the top ten, with a solid average rental return of 6.5 percent, while capital growth hasn't been as robust as other cities on the list over the last five years.
Newcastle, on the other hand, has one of the strongest graduate retention rates in the country and is one of the fastest developing places for new start-up enterprises, both of which will likely raise demand from young professionals, resulting in higher rental costs and yields.
6. Leeds
Average Price: £268,037
Average Rental Yield: 5.1%
Price Growth in Five Years: 9.4%
Leeds is home to 800,000 people, and 73 percent of homes are rented, making it an attractive location for investors looking for long-term tenants and steady earnings.
Leeds has one of the fastest-growing economies in the country, rivaling numerous European cities, which is having a significant impact on job prospects within the city, attracting roughly one in ten people from London each year since 2018.
While capital growth has been just under 10% over the last five years, JLL anticipates a 13.7 percent increase in the next five years, as well as 14.2 percent cumulative rental growth.
7. Edinburgh
Average Price: £333,691
Average Rental Yield: 4.19%
Price Growth in Five Years: 12.33%
Edinburgh is a perennial feature in the league tables for residential investment. The Scottish capital has witnessed exceptional price rise over the last decade as a result of its huge desirability as a place to live and work, as seen by its somewhat higher average price point than most of our top ten.
With its steadily improving economy, JLL forecasts a 17.1 percent increase in property prices over the next five years, the greatest growth rate of any UK city.
8. Bracknell
Average Price: £383,788
Average Rental Yield: 3.98%
Price Growth in Five Years: 11.02%
With London experiencing the brunt of the lockdown's impact in 2020, with weaker demand from both buyers and tenants, the focus has shifted to locations outside the city, with several surprises - Bracknell being one of them.
Bracknell, which is home to a slew of globally known tech companies like Dell, Microsoft, and 3M, is also in the midst of a £770 million regeneration project that has already improved its appeal tremendously, with Knight Frank predicting price growth of 17% over the next five years.
Bracknell's housing prices have climbed 249 percent in the previous 20 years, yet it's still nearly half the price of London, despite being less than an hour away.
9. Sheffield
Average Price: £209,405
Average Rental Yield: 5%
Price Growth in Five Years: 11.41%
Sheffield has grown in recent years as a result of a £480 million investment in its shopping sector and other upgrades to amenities. As a result, these central neighborhoods have become more desirable, with rental yields reaching as high as 7% in some postcodes.
Crucially, Sheffield is one of the top markets to emerge from lockdown, with Zoopla reporting a 20% increase in sales compared to the start of the year.
10. Glasgow
Average Price: £194,545
Average Rental Yield: 5.2%
Price Growth in Five Years: 15.05%
Glasgow is another important Scottish city that is currently consistently at the top of the property investment statistics. Glasgow has a lower entry point than Edinburgh, but it has a better five-year capital growth rate and a slightly higher average rental yield, both of which are expected to increase further over the following five years at 15.4% and 13.4%, respectively.
So what does this all mean? What are our honest thoughts?
As you could see statistically speaking these places top the list for the best buy to let property investing for either for rental yield or capital growth purpose. These figures would certainly make a good reference point when choosing your next investment area. The important thing to keep in mind when choosing your next investment area is the familiarity with the area. Each area tends to have a micro-market within itself and one street may have significant differences to the other and without the local knowledge of the area it can be difficult for an investor. The yields may also be very different in each micro-markets as well as the rental demand. We recommend you invest in the area that you are well versed with although it may not be on this list. If you would really like to invest in the areas above, we suggest that you get in touch with local experts whether that be the estate agents or property sourcers or other local investors. Make sure to do your due diligence thoroughly. We also tend to make a checklist when investing in a new area and that is something that you should create too. Remote investing is also possible but you will need a very good team to project manage and a very good estate agent/property manager looking after your property. Some of us are simply not comfortable with your investment property being far away and if that is you, definitely consider investing locally. Do get in touch with us if you need advice with this.
But you ask “ok but how about capital growth over time?”
Focusing on capital growth is a certain way to wealth creation for property investors. However, professional investors tend to create value and force capital appreciation themselves rather than waiting for the slow capital growth over the years. There are 3 ways that can be done 1. Buying below market value and locking in equity early 2. By the way of development 3. by the way of asset management, especially in commercial properties. Going into detail will require a whole new blog.
Here at Win Legacy we tend to look for investment opportunities where we can actively add value rather than relying on a prediction of what may or may not come true. Minimising the risk is only possible when you have limited speculations impacting on the outcome. We do consider an educated prediction of capital appreciation as a factor in our decision making but for us, it is not the sole deciding factor in choosing an investment opportunity. If you are not a property professional and are unable to find an opportunity where you can force appreciation or perhaps you simply want an easy simple B2L investment, these data are still a very good reference point. We often come across deals where you may be able to lock in equity from the moment you buy by buying low, or adding value by doing small refurbs. We also project-manage from start to finish in the areas we operate in. Sign up to our mailing list on our website to receive such deals.
