For a very long time, the UK has been regarded as an attractive destination for property investment, offering stability and opportunities for long-term growth. For investors researching the best places to invest, understanding regional property trends is essential. These are some of the key trends shaping the UK’s property market:
Growth in property value: As a whole, the value of real estate has risen across the UK, but the level of its appreciation has varied across regions. Property values are also influenced by factors such as supply-and-demand imbalances, interest rates, economic conditions, and government factors, both local and overseas.
Regional distinctions: The performance of the housing market differs markedly across regions of the UK. While housing in London and the South East is much more expensive than the North East, North West and the Midlands, these other areas have started to be a lot more attractive in recent years. Whilst prices have risen, they aren’t on the same scale as London.
This makes it very attractive for buy-to-let investors who could buy a property for circa £80k (or even less in some areas) and rent it out for £800, or even a £1000 or more in some cases. The yields are a lot more attractive in the Midlands and North of England.
Rental Market: The UK rental market remains robust in general, for several reasons including demand, demographic changes reducing the number of first-time buyers, and the affordability of purchasing property. Property investments have not lost their popularity, and Buy-to let is still thriving, particularly in rental hotspots.
Whilst recent Government legislation such as the Renters’ Rights Bill has affected a lot of Landlords who have exited the market, there are still plenty of opportunities to buy and rent out for decent cash flow. Here is a more detailed breakdown:
Renters’ Rights Bill: This is the current name for the bill introduced by the Labour government. It focuses on:
- Banning Section 21 “no-fault” evictions
- Ending fixed-term tenancies
- Prohibiting discrimination against tenants on benefits or with children
- Introducing a Decent Homes Standard for the private rented sector
- Establishing a Landlord Ombudsman
- Creating a private rented sector database
Material flow of housing: There is a shortfall of housing in the UK, particularly in high-demand areas. This lack of supply, predicted population growth, and limited land available result in affordability issues for buyers and opportunities in the rental market for investors.
The Labour Government has promised to build 1.5 million homes; however, in my mind this is highly unrealistic, as there are still many anomalies to deal with from a feasibility and planning aspect.
Government Policies: Government policies and laws such as stamp duty changes, Landlord tax hikes, and policies to encourage or reduce housing stock are just some of many policies which can impact the market. Investors would be well advised to track policy news and associated outcomes.
Area focus: The search for properties in areas that make money. If you want to find property in the UK to source, you have to consider where the best places to invest are. Here are some regions to consider.
London: The capital remains popular with property investors, thanks to its strong economy, and there is always strong demand for rental properties. London is an expensive city and naturally demand for property is high, but it also has its caveats and stipulations.
Rental prices increase quite regularly, even more so because of the recent changes to government policies. My personal preference when it comes to investing in London is not traditional buy-to-let because the yields are just not strong enough. My preferred strategies in London are commercial-to-residential conversions, sites that can be redeveloped with new dwellings, or high-yielding HMO conversions.
South East: Good economic growth and relatively close to the capital, linked by great train services, with places like Oxford, Cambridge and Brighton. These benefits have resulted in it being the perfect investment in residential and commercial property.
For those who look for more affordable areas, such as Essex, Kent, and Surrey are great options and also have great links into London for those who work there. Whilst purchase prices are normally lower, it would only make sense to do buy-to-let in these locations if the rental yields are closer to the purchase price. In these areas, you are likely to find properties cheaper than in London. However, I would also look at any conversion, HMO, or new-build opportunities.
South West: With its enchanting landscapes and coastal areas, the South West region, including cities like Bristol, Bath and Exeter, attracts tourists and residents alike. Property prices are generally more affordable than London; however won’t be as cheap as some parts of the North East and North West. There are opportunities for holiday rentals and student accommodation, as there are some good universities that will naturally garner interest for student accommodation.
Wales: Many places in Wales are good for investing, thinking of places such as Cardiff, Swansea, Newport, etc. Again, there are some really picturesque parts of the county, as well as student rental demand. Also, you can get houses fairly cheap compared to the UK and receive strong rental yields, and also things like the renter’s rights bill don’t affect Wales as a whole, but there will be some of the same changes in England, such as the ban on discriminatory practices.
Scotland: There are some of the highest yields available in Scotland, so if sourcing or investing there is viable to you, this is a great option. In places such as Edinburgh, Glasgow, Aberdeen, etc, it is possible to achieve yields of circa 8% and even higher if a property is bought at a competitive price. Again, like several areas, there are good universities with good student demand for properties.
Midlands: I have family that originates from Wolverhampton in the West Midlands, which is an area where a lot of investment has been provided; there are other places nearby including the second city Birmingham, as well as places like Walsall and Dudley. The East Midlands comprises cities such as Derby, Leicester and Nottingham.
These areas have undergone significant renovation, infrastructure spending, and job creation over the years, which are some of the reasons the area is in high demand for both residential and commercial properties and hence, they are always popular as a great place for property sourcing.
North West: The North West, which includes cities Manchester, Liverpool and Leeds, has seen growth in a number of its sectors, with technology, media and life sciences all performing well. There are large companies such as the BBC with hubs in Manchester.
The prices have risen significantly over the years, and unprecedented growth has created a need for housing and commercial real estate.
North East: Sizeable growth has been seen in the North East, which is home to Sunderland, Middlesbrough, Newcastle, County Durham, and Sunderland areas in recent times, with both Amazon and Nissan already established in the North Eastern region.
Secondly, there are some reputable universities (Durham, Middlesbrough and Newcastle, for example) that are good student investment areas.
Emerging areas: Look out for emerging areas, or regeneration zones, where the process of change is currently taking place, and significant investment is being made.
These are typically spaces where both capital growth and rental yields can rise as an area gentrifies, and new shops and residents move in. For example, homes near the HS2 project might be worth exploring. Explore methods for discovering hotspots for your investments; here are some research resources to help you identify the places with the best potential for investment.
Market Research: Look at market reports, property price indicators, economic indicators, and see if anywhere is growing, in property terms or areas that look like they will benefit from growth. Look for areas that have a good economy and that are adding jobs.
Rental Market Demand Specialisation: Estimate rental market demand by market segment for different neighbourhoods and taking into account indicators such as population growth, employment, universities, lifestyle amenities. Hot rental markets can be great investments.
Local Knowledge: Use local expertise; take a look at what local estate agents, property experts and pundits have to say. They can provide a window onto relevant industries, emerging themes and investment ideas.
Infrastructure: Look out for any potential or established infrastructure projects, which are going up or in place, such as these being captured with transport enhancements, regeneration plans or new business development.
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