Where are the UK Hotspots for Investing - Where to Invest in Property?

If you're looking for the best property investment UK, you've come to the right place.

We have analysed some of the UK’s top performing areas in terms of capital growth and rental yields in 2021 to see where potential opportunity may lie. If you are ready to invest in property this year, why not discover where we think the best places to invest in UK property in 2021 are.

UK hot spots for capital growth

1. Manchester
2. Leeds
3. Cambridge
4. London

When we talk about capital growth, we mean how much the asset (in this case, property) will grow in value over time.

We think capital growth will be driven by the economy and jobs market in a particular area. Cities with well-performing industries will continue to attract young professionals and those established in their careers looking for a place to live.

Manchester Capital Growth

Over the years, Manchester has seen a significant amount of regeneration and investment. This, along with its huge student population (largest in Europe) and reasonable office space costs, has attracted businesses such as Google, Amazon, and Microsoft to set up offices in the city. As a thriving economic centre, it rivals Birmingham in being dubbed the UK’s “Second City”.

Its regeneration and booming business sector have had a knock-on effect on property prices as people scramble to buy homes near to their place of work. According to Zoopla, Manchester led the UK house price growth in 2020, with the average house price rising by 5.7%. On a wider scale, the North West as a region led the way in terms of house price growth, with a 5% year-on-year increase.

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According to Land Registry figures, Manchester has seen the largest property price growth in the UK over the last twenty years. The average cost of a home increased by 143 per cent from £73,910 to £179,537. With such a strong record it is entirely possible for investors to take advantage of this growth.

Property in the northern part of the city centre has gone up considerably in value since regeneration commenced and the average price for city centre property is £224,626. However, Ancoats is a neighbouring district that has a lower average at £219,174 according to Zoopla. It has also won the accolade as one of the coolest neighbourhoods in the world due to its abundance of independent eateries and cafes. Apartments in Ancoats Gardens Manchester start from £239,950 and boast an enviable city centre location close to NOMA and the Central Business District.

The city of Salford also performs well in terms of house price growth. Home of the MediaCityUK, it attracts young professionals who work in the media industry. Average property prices in Salford are typically lower than Manchester at £175,205, but it is just a three-mile journey to Manchester city centre and takes around twenty minutes on public transport.

Below market value property in Salford with premium facilities such as Queen Street could offer investors excellent returns. Starting from £163,548 for a one-bedroom apartment and offering attractive onsite amenities such as a 24-hour gym and workspace for those who now work from home, Queen Street is attractive to residents and investors alike.

If you're specifically looking at Manchester property investment, why not read our best areas to invest in Manchester article?

Leeds Capital Growth

Strong economic performance in Leeds has led it to feature as a hotspot for capital growth and rental yields and Savills predicts that property in Yorkshire will increase by 21.6% through to 2024 making it a hot spot for those who are investing for capital growth.

As the UK's fastest growing city and the main contributer to a city region with a £64.6 billion economy, we think property prices here will continue to rise. Over the next ten years, the economy in the city region is expected to grow by 21%, with financial and business services contributing to around half that growth. As more people move to the area seeking new employment opportunities, the demand for suitable housing will increase.

Investors can take advantage of budding growth by choosing areas that are undergoing regeneration or have been recently regenerated. Those wondering where to buy property in Leeds should consider the LS3 post code.

Apartments in West Central Leeds start from £164,800 and the location is just a 15-minute walk from Trinity Shopping Centre and 10-minutes from Leeds City Station. These newly built apartments are designed with energy efficiency in mind, and also has a reception and cycle storage facility for residents’ use.

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Cambridge Houses Prices and Capital Growth

Aldermore’s buy-to-let tracker was used to calculate price growth in particular areas and found that Cambridge saw the second-highest growth of any city. Over the past decade, property prices in Cambridge have risen by 61%, driven by its strong economy and jobs market.

In the past Cambridge has been named as the easiest place to find a job, and the percentage of adults between the ages of 16-64 that are employed stands at 79.4% which is above the average for Great Britain at 75.7%.

Cambridge is home to the “Silicon Fen” (sometimes known as the Cambridge Cluster) which is home to many high-tech companies with a focus on software, electronics, and biotechnology, such as ARM and AstraZeneca. The people who work in the Silicon Fen are usually highly educated and earn good wages, which has stimulated the property market.

The industries that Cambridge accommodates are constantly expanding in the modern world and ONS figures have already recorded that the city’s science and biotech sector has grown from £9.3bn to £24bn. With a world-class university and lucrative job opportunities in tech, the city continues to attract top talent.

All the new people moving to the city need somewhere to live, and Cambridge’s limited property market means that property is a precious commodity. According to Propcast, no areas in Cambridge are expected to experience a fall in prices.

London Postcodes for Capital Growth

Owning property in London is highly coveted but high prices puts it out of reach for many. If you are thinking of buying property in London, there are still some postcodes where property is affordable, but prices are performing well. We believe investors should consider areas in outer London as prices have generally outperformed those in inner London. Inner London is home to the most expensive boroughs and in recent times growth in the top end of the market has been sluggish.

Barking and Dagenham is known as London’s cheapest borough, with an average property price of £301,478. Prices have increased by 40% between 2015 and 2020, and with a regeneration project planned to deliver 50,000 new homes at Barking Riverside and Barking town centre, prices are only expected to increase. Barking has an underground station that lies in fare zone four and being a suburb, it allows buyers to get more for their money – something much coveted during the pandemic.

Over the past ten years, property prices in Walthamstow have more than doubled. The area seems to be attracting young families moving from inner London in search of more space. The advantage of Walthamstow is that even though it has more of a community feel compared to inner London, it is surprisingly well-connected. Its underground station is in fare Zone 3, and it has an Overground connection to the City of London through Liverpool Street.

Walthamstow’s housing stock is attractive, being mainly Edwardian and Victorian stock. It also has the longest market in Europe, a shopping centre, independent restaurants and cafes and a craft beer venue. Properties in Walthamstow take on average just 26 days to sell, suggesting there is significant demand for this area of London.

UK hot spots for rental yield

1. Liverpool
2. Leeds
3. Doncaster

To achieve good rental yields, investors should consider areas with relatively low property prices and high rental demand. This could be characterised by a certain demographic. For example, cities with younger populations tend to rent. Properties that can be rented out as short term lets can achieve higher yields because they typically command higher prices. Hotels and serviced apartments are almost always more expensive to stay in per week than residential properties.

We have mentioned in more depth about rental yields and what properties can offer high rental yields.

Read on to discover how to achieve high rental yields through buy-to-let properties by considering the following areas.

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Liverpool Rental Yield

Historically, cities such as Liverpool have offered good value in terms of property prices, and its student population combined with the number of graduates and blossoming employment market means that rents are slightly higher. For example, average property prices in the L7 post code stand at £95,000, yet a 10.30% yield can be achieved. Liverpool is one of the best places for rental income.

Leeds Rental Yield

Leeds was recently named as the most profitable city to become a buy-to-let landlord in the North of England and the third most profitable city overall. Landlords can take advantage of low property prices in Leeds and a good student and graduate population to maximise rental yields. According to research by CIA Landlord, the average monthly profit an investor could make is £432.29 from a property with an average price of £189,738.

According to a report released by JLL, rental yields are forecasted to grow by 14.2% over the next five years so there is potential for future growth in the market. The number of people moving to Leeds from London has risen by 58% in the past five years. Its vibrant culture and booming employment market combined with a lower cost of living is enticing them, find out more about what Leeds is like as a place to live.

Doncaster Rental Yield

According to Aldermore's 2020 buy-to-let city tracker Doncaster is a top ten location for UK rental yields, with investors receiving a 7.9% average yield. Doncaster benefits from a booming logistical industry due to its location and infrastructure, and this attracts workers in steady employment, as the industry is poised to expand.

As it is close to the A1 and M18 motorway and equidistant between London and Edinburgh, Doncaster is ideally placed as logistical location. It also has its own railway network called iPort, which connects to the main railway network and its own airport, allowing for efficient distribution.

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Many online retailers have a presence there, and work has just recently completed on Amazon’s £100m logistics facility. This has created more jobs and of course those workers need somewhere to live. Discover how Doncaster as a transport hub is a good investment opportunity.

In 2020 house price increase in Doncaster was the second highest in the whole of Yorkshire at 8.8 per cent and with the influx of new warehouse workers requiring a place to stay, this is only expected to increase when they choose to buy property in the coming years.

While Doncaster already commands impressive yields, there is an opportunity to increase it depending on the type of property you invest in. HMOs (or shared housing) are popular with warehouse workers as it offers a cheaper alternative to renting a whole property.

There are companies that operate by converting derelict houses into 5-bedroom HMOs creates an income producing asset. The house is then mortgaged upon completion of the refurbishment and up to 70% of the new valuation returned to investor to reinvest elsewhere.

The shared housing investment in Doncaster costs £215,993. This outlay includes the property, HMO licence and renovation costs. Upon completion, the investment will be advertised through spareroom.co.uk, and is usually tenanted within two weeks according to past performance of similar properties.

Ongoing management will be provided in terms of tenanting and maintaining the property, so investors can enjoy the income an HMO generates without the hassle. The average yield achieved is between 10% - 16.46% depending on initial leverage. Investors can also achieve a 15% return on cash invested.

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UK Property Hotspots Analysis

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For those looking for capital growth hotspots, we recommend considering areas with a strong or growing economy where there are good levels of employment. Cities such as Cambridge and Manchester have had consistently strong economies and a highly educated workforce, and they will all be looking for places to live. The economy in Leeds is quickly developing and modest property prices mean there is more scope for growth. It is also worth considering areas where transport links are improving, as once it gets better connected people will be more likely to live there to save time on commutes.

Those looking to invest for rental yields should consider areas where prices are low but there is a demand for good quality housing. Liverpool consistently delivers good rental returns, with the L1 post code delivering returns of around 10% according to recent research.

Contact us today to see how we can assist with your investment strategy.Alternatively, if you are considering buy-to-let investments, read our buy-to-let mortgage guide to make sure you have the capital required to move forward with your chosen investment?