The expectation for 2018 according to PwC is that interest rates will not rise enough to dampen investor enthusiasm for real estate. The UK enjoys the second highest amount of investment in real estate out of all European countries, totaling €64bn between Q4 2016 and Q3 2017, and with most of the UK public having no confidence in the government to effectively address the housing crisis and their ability to afford housing, the rental pool will not shrink any time soon.
As inner London becomes increasingly more unaffordable, young professionals are beginning to move to towns within commutable distance of the capital. With regards to property investment, will 2018 be the year of the commuter town?
Slough is undeniably well-connected and located in the Thames Valley, a region FDI Intelligence mentioned in its “European Cities and Regions of the future report”. Slough and the surrounding region is thriving, with over 4,600 businesses located in the area, including corporate heavyweights such as Unilever, Honda, Ferrari and O2.
Not only is it convenient for young professionals who are working locally, but with the construction of Crossrail it is about to get even better connected. Journey times to key London stations such as Liverpool Street and Canary Wharf will be slashed, appealing to young professionals working in those areas but who are priced out of London.
In part this is already happening. A report by Countrywide has found that more homes in Slough are let to a tenant moving to the town from the capital (46%) than anywhere else in the country. Investors should start to think about catering for London’s overspill.
London commuter towns such as Stevenage have, in recent years, experienced a phenomenal rate of growth in property prices. Between June 2007 and June 2017, the average house price in Stevenage increased by 58.5% from £181,475 to £287,692 according to HouseSimple.com. Having said that, its proximity to London means it is still an affordable option for those who have been priced out of the capital. One bedroom flats in Kings Cross are selling for £675,000, and as that is beyond most people’s budgets, it makes sense that more people are choosing to buy property within easy commuting distance.
There is already a direct train to King’s Cross – an area that has seen much rejuvenation and is now the home place of Google’s £1bn head office, that takes just 26 minutes. Stevenage is also about to become a lot better connected, with the Great Northern railway line being extended to connect Stevenage with other stations in London such as Farringdon and London Bridge, as well as places south of London such as Gatwick Airport and Brighton. We predict that with these improved connections to other London terminals and on towards Sussex, appetite for property and accommodation in the Hertfordshire town will soar.
Central London is now almost completely unaffordable for the majority of those living in London. Consequently, people are moving to outer boroughs, and Redbridge has appeal. Boasting leafy suburban areas such as Woodford, Redbridge is known for its well-performing schools, excellent transport links and beautiful parks – including parts of Epping Forest. According to a survey conducted by the Office of National Statistics, Redbridge came top out of all London boroughs when residents were asked how satisfied they were with their life so it is little surprise that demand for property in the borough is high.
Landlord insurer Direct Line conducted research which found that properties on the Central line provided the best investment opportunities and many stations in Redbridge are served by that underground line. This is no surprise, as demand for property within the borough is clearly soaring. Between 2001 and 2011 house prices in Redbridge rose by 15.3% to £278,970, and with more people gravitating towards the outer boroughs, we can only see property prices climbing.
Birmingham remains a UK property investment hotspot, and we can see it retaining that title well into 2018. It was recently ranked in 21st position for its overall investment prospects in 2018 amongst both domestic and European rivals. The report named ‘Emerging Trends in Real Estate Europe’ was compiled by PwC and thinktank Urban Land Institute, based upon the opinion of over 800 real estate professionals in Europe including estate agents, investors and developers.
Birmingham’s steady position as a property investment hotspot is also in part due to the enthusiasm it is receiving from global corporations. HSBC has announced that it is creating a new headquarters at the Arena centre, and HMRC are also setting up a new regional office in the city. The promise of new jobs will be chased by young professionals, who will be looking to settle down in the city and will require accommodation.
Many large companies and investors are considering investing in Birmingham, as they move away from London’s inflated property market due to Brexit concerns. The average house price in Birmingham is still a modest £183,399, and average yields reaching 5.02%, it has made LendInvest’s markets to watch list, and should definitely be on every investor’s radar.
Manchester was also mentioned in PwC and Urban Land Institute’s ‘Emerging Trends in Real Estate Europe”, and ranked in 20th position for its overall investment prospects in 2018.
Its popularity is bolstered by investors being cautious about plunging more money into London’s property market. Prices in the capital are so over-inflated, investors are beginning to look elsewhere in the UK. Manchester is a key city in the government’s Northern Powerhouse project and now a host of new businesses have called it home, including HSBC, RBS and Barclaycard. It has also experienced some of the strongest house price growth out of any UK city, and enjoys attention from overseas investors, with Germany naming it has the most important city outside of London for investment.
Over the past decade Manchester has experienced a phenomenal amount of investment and regeneration, which in turn has made it a more attractive place to live and has also improved its economy immensely. As Manchester becomes more appealing to young professionals, it is no surprise that it is a lucrative place to purchase Manchester buy to let property. It was featured in LendInvest’s quarterly Buy to Let Index Report as one of the top 10 buy to let postcodes due to the rental yields that can be achieved.
With the Chancellor allocating funds to build new homes in the Cambridge – Milton Keynes – Oxford corridor and earmarking £7bn for improved transport links between the areas, we think the town of Milton Keynes will be on many investor’s minds next year. The average house price in Milton Keynes is £276,713, compared to average property prices in Cambridge and Oxford, which sit at £488,398 and £507,529 respectively.
Due to its strategic location, equidistant between important cities such as Birmingham, Oxford, London, Cambridge and Leicester it is ideal for professionals working in these areas who are looking for cheaper accommodation, especially once the transport links between the Cambridge – Milton Keynes – Oxford corridor are improved.
Nottingham stepped into the limelight in 2017 as a place to watch if you wanted to achieve excellent rental yields.
The midlands city is home to the prestigious University of Nottingham, the legends of Robin Hood and it was even going to nominate itself for the 2023 European Capital of Culture. It is also flanked by some of the UK’s most beautiful countryside, including the Peak District, Sherwood Forest and the Vale of Belvoir. However, that is not all it has going for it!
According to Mortgage Broker Private Finance, average rental yields in Nottingham are the second highest in the country at 5.6%. It also performs well in terms of capital growth, as according to eMoov.co.uk over the next 10 years Nottingham will top the tables for average house price growth at 0.8% per month. This means that the average property price will increase by 160% between 2017 and 2027, from £133,215 to £346,592.
The attraction of Nottingham is that 25% of its population is aged between 16-24 – one of the prime demographics that will be looking for rental property. It also boasts excellent travel connections, that makes 90% of England’s population accessible.
Rental property in Glasgow achieves some of the best yields in the UK at 6.9% on average due to the high number of 21-35-year olds (28.5% of the total population). Not only that, but property prices have been increasing at a staggering rate. Since June 2016 property prices in the Scottish city have been increasing by 0.7% per month, which if continued would mean prices would achieve an average of £285,487 by 2027 according to eMoov.co.uk. Glasgow previously suffered from slow house price growth which is why housing in the city is largely affordable compared to other places in the UK, however since 2016 prices have begun to accelerate in the city.
To achieve good rental yields, property prices need to be low in comparison to the rental value. 2018 is an ideal time to invest in property in Glasgow, whilst property prices are still low enough to promise good rental yields, but have capability of achieving good capital growth should the investor wish to sell the property in the future at a profit.
“Places we have chosen for our best places to invest in property UK 2018 list are areas that are experiencing tonnes of regeneration, whether that be improving the urban landscape or making travel infrastructure changes.” Says investment director Arran Kerkvliet of One Touch Property Investment.”The significant young population of places such as Nottingham and Glasgow will make them attractive to investors, as there will be a significant rental market and low property prices will further buoy the rental yields that can be achieved.”
“Towns such as Stevenage are close to London but property prices are significantly lower, which is perfect for those struggling to get onto the housing ladder in the capital. Improved transport links due to be completed in 2018 means that even more of London and beyond will be accessible from Stevenage, so this year is a really exciting time to invest.” He added.
Where do you think the best place to invest in property in the UK in 2018 will be?
Interested in investment property news?
Sign up to our newsletter and keep up to date on the latest property news and investment opportunities.