Where are you investing in 2021?
Finding the best areas to invest in property is one of the most important, yet time consuming tasks a successful property investor must undertake.
It requires hours upon hours of gathering data from sources such as Rightmove, Zoopla and On The Market, where the vast majority of property sales and rentals are listed, as well as keeping an eye on current economic issues that may affect the UK property market. Not carrying out the correct research can quickly turn a good investment into a bad one.
For example, you may have heard a lot of investors talk about buying property in Bradford City Centre where rental yields are some of the highest in the UK. In the BD1 postcode, an investor can earn an average of 10% per annum on a studio apartment, which are very attractive numbers for any investor.
However, as rental yields are some of the highest in the country, so is the crime rate. Between 2018-2019, there were 1,173 crimes per 1000 citizens, according to police.uk—most of which were violence, sexual offences or theft.
Does this still sound like the kind of investment you want to undertake?
At Elavace, we have a marketing team who are constantly researching the UK market not to find short term trends, but to find sustainable investment locations with healthy rental yields and value appreciation.
This article was written to help you understand what we think are the UK’s best prospects for property investors heading into 2021 and why.
In recent years, the North West has been, and continues to be, the UK’s #1 location for investing in buy-to-let property, and Liverpool is spearheading the trend.
Over the coming years, the Liverpool waterfront will undergo a massive regeneration scheme called Liverpool Waters, which will see £5.5Billion invested, creating 17,000 full-time jobs in the city.
We will also see a brand new 52,000 seat stadium built in Liverpool’s Bramley Moore dockland area which will host music concerts and international sports events, bringing more tourism and money into the city.
Its highest performing areas are the L1 postcode, which averages 8.1% in annual rental yields, and L7, which averages 10.1% annual rental yields. Residing in the L1 postcode is the Baltic Triangle, Liverpool’s creative quarter, voted the UK’s trendiest place to live by The Times in 2017. L7 is near The Knowledge Quarter and hosts the Royal Liverpool University Hospital, which offers great demand for properties in the area.
Other high performing postcodes for rental yields in Liverpool are L2, L3, L20 and L6.
Liverpool is also the 4th highest performing city in the UK for long term capital appreciation, with property prices achieving an average of 3.3% value increase per annum.
Another North West city that has proven a profitable location for investors in recent years is Manchester. It is one of the most popular destinations for aspiring young professionals to study and work and has seen massive investment over the years.
While rental yields in most Manchester areas rarely surpass 6%, it’s best postcode for buy-to-let investors Is M14 which is primarily a residential district. Annual yields in this area average around 7.6%.
The majority of residents in this postcode are aged between 20-24 years old. This is because of young students attending one of the many Universities in the area taking up residence close by.
Crime rate in this area is also very low. Between 2018-2019, there were only 125 reported crimes per 1,000 citizens, according to police.uk.
There is a shortage of 1-bedroom apartments in this area and rental yields will typically fetch around 6-7% per annum. Our Lyceum development presents a fantastic opportunity for both buy-to-let and capital growth investors to take advantage of this Manchester ‘ripple’ effect. To find out more, click here.
While rental yields aren’t high in most other Manchester postcodes, the strength lies in its potential for capital growth. Over the last 5-years, Manchester has seen terrific growth not only in the city centre, but also in the areas on the edge of the city. Property in areas such as Eccles (M30) have seen capital appreciation averaging 31% since 2014.
As of July 2020, Manchester is the 2nd best city in the UK for long term capital appreciation on property. Annual property values increase by an average of 4%, compared to the UK average of 2.6%.
North Wales is renowned across the world for its vast mountainous landscape. For this reason, around 30 million tourists visit this rural region of Wales every year where the Snowdonia National Park is wholly based. Consisting of mountains, waterfalls, and trails, Snowdonia is the largest national park in Wales. This, combined with its coast (on the IrishSea), has led tourism to knock farming off its longstanding perch as the principle economic force in the area.
Despite it being sparsely populated, North Wales has a population of around 696,000- more than the Northern Powerhouse giant, Manchester, according to Welsh Government figures. They also add that this region has the highest employment rate, the lowest unemployment rate and the highest household income of any Welsh region.
Property investors diverting their attention towards NorthWales in the pursuit of lucrative property investments are certainly looking in the right place. Property prices in North Wales are around 30% lower than anywhere in the UK. According to HM Land Registry figures, the average house price in the UK is currently £234,742, meanwhile the average house price in Wales is currently just £165,135. It is clear that North Wales presents investors with the opportunity to snap up some serious bargains, with some buy-to-let properties priced as low as £35,000!
Rental demand in North Wales is generally positive, however, demand will vary from region to region. In some areas, the demand for buy-to-lets consists predominantly from the local market. In many other parts of North Wales, there is significant demand for holiday lets or student lets. According to Homelet, rents rose by a healthy 5.5% between 2019-2020 across Wales. With this in mind, along with below UK average house prices, property investors can expect to find generous rental yields here.
More than £100 million is currently being invested into making North Wales an even more popular destination for tourists. The best news for property investors is that there are further plans to boost the economy in this region. As we have learnt from Liverpool’s staggering regeneration in recent years, these plans only stand to benefit the North Wales property market! The North Wales Economic Ambition Board has jointed the Welsh and UK Governments to sign a deal that could see £1 billion pumped into North Wales. The focal programmes of this deal include projects in low carbon energy, advanced manufacturing, agriculture, tourism, and much more.
You could be forgiven for thinking that Birmingham would be the top location for property investments in the Midlands. After all, the city has seen fantastic growth over the past 5-years and is set to benefit further from the HS2 rail network that will run through the city. However, property prices are very high in the city centre areas (usually over £300 per sq/ft) and average rental yields don’t break 5%.
The Midlands still offers some great opportunities for investment in its other areas.
In an attempt to escape the high prices of Birmingham CityCentre property, residents are heading 10 miles North to Walsall where1-bedroom apartment prices are significantly less compared to Birmingham, at an average of around £181 per sq/ft.
It also presents a great opportunity to generate capital growth at an even higher rate than Birmingham too, with the city’s top postcodes seeing an average of 24% value increase since 2014.
Rental yields in the WS1 area typically fetch an impressive 7.4% for a 1-bedroom apartment, making this a far more interesting option to invest in the Midlands.
Nottingham has been gaining a lot of attention over the last couple of years from UK property entrepreneurs. With fantastic affordability and high rental yields, it is one of the best buy-to-let hotspots in the United Kingdom. In areas such as NG1 and NG7, investors could generate rental income yields of up to 9.9% this time last year. However, this has died off now and sits around the 6.5% area, which is still a healthy yield.
Nevertheless, Nottingham's strength as a top UK property investment location is in it's long term yield. Property prices in general across Nottingham are increasing at around 4.4% per annum—the highest in the country according to Zoopla.
It’s transformation from being a world leader in markets such as bicycle making and textiles into a more future-focused city with its main industries now being financial services, life sciences and digital technology, among others, has cemented its status as the Capital of the EastMidlands. It’s booming creative quarter has helped generate over 1000 new jobs in the city between 2013-2019.
Nottingham is home to not just one but two universities, meaning there is a large student property market. The University of Nottingham has 32,000 students andNottingham Trent University has 25,000. Another noteworthy Nottingham institution is the Queen’s Medical Centre. QMC is a regional ’super hospital’ and the largest teaching hospital in the UK. Six thousand people work here, creating a massive demand for property to buy and to rent.
The next city which is currently red hot on the UK property market is one of the biggest forces in the Northern Powerhouse, Leeds. This city is particularly noteworthy when it comes to population growth as it is the UK’s 7th fastest growing resident population. The city of Leeds hosts a population of around 800,000 people, many of which specifically preferring to rent. Using the city centre as an example, 73.3% of households in the LS1 region are renting, compared to the 19.9% average for the city. This is why Leeds is not only one of Britain’s largest and most centrally located cities, but it has also become one of the UK’s most exciting rental markets for property investors all around the world.
Rental demand in Leeds is picking up momentum and is expected to continue doing so for many more years to come. From a 2018 report in the regional daily newspaper, Yorkshire Post, quoting research by consultancy firm JLL, Leeds is the market to watch for rental growth over the next five years. Moreover, city living has gained a significant push over the previous three years and, together with an active student market, has spiked demand in both sales and lettings markets.
It is clear to see that having the largest concentration of Higher Education institutions of any city outside the capital has been paramount to the city’s 40% growth over the last decade. The JLL report also predicted average rental growth of 3.5% per year over the next five years. And to add to this, another report from the independent newspaper explained that rents are growing several times faster in Leeds as well as Liverpool, Birmingham, and Manchester than that of London. This is because of the ‘millennial exodus’ from the capital which has pushed demand for homes further afield in the North. Following Covid-19, millions have closed their office doors for the last time to relocate to their own homes, and for this reason, the London exodus has already shifted dramatically. According to a report released by the Royal Institution of Chartered Surveyors, more than four-fifths of property professionals surveyed across the UK believe there will be an increased desire for homes with gardens or balconies. Exciting times ahead for the Northern Powerhouse!
Economically, Leeds is in the best possible steed to weather the Coronavirus storm. According to Invest Leeds City Region, the economy of the city is worth £66.5 billion and contributes to 5% of all UK economic output. Best of all, the city is said to have a larger economy than nine European countries! Leeds has quickly become a desirable location for property investors on the market for a long-term property investment, as its considered the city for the future cited as the 6th most prominent destination for digital and tech jobs. Add this to the £350m South Bank regeneration, HS2development, and Channel 4’s relocation to the city, Leeds is showing all the right signs of great investment potential.
In the LS4 postcode, you can expect to earn around 8.6% annual rental yields and a 3.6% annual value increase on your property.
Newcastle is a city 103 miles south of Edinburgh and is the 8th largest city in the UK in terms of population. It hosts a variety of corporate headquarters and has strong education, digital and retail centres.
The most lucrative investment properties in Newcastle are usually found in residential areas with terraced housing, although the city centre areas of NE1 and NE2 have some fantastic opportunities to purchase apartments with rental yields exceeding 7.8%.
Capital growth isn’t great, however, with property values increasing at just 2% per annum—a rate below the UK average. But if you live up North and you only want to invest on your doorstep, buy to let in Newcastle is still a profitable option.
Glasgow is Scotland’s largest city and is also the third wealthiest city in the UK. It has an economic growth rate that is surpassed only by London and is ranked as one of Europe’s top ten financial centres.
It has strong Bioscience, Healthcare, Education, retail and tourism sectors and is home to the most extensive urban railway network outside of London.
Scotland’s second most popular tourist destination, attracting over 2.5 million visitors a year, it has a thriving market for short-let investment property as well as long-let opportunities. There are fourUniversities and seven colleges of higher education within 10 miles of the city centre with the second highest student population in the UK, presenting great opportunities for student accommodation investment too.
The G31 postcode allows investors to earn an average of 7.5% annual rental returns while enjoying healthy capital growth of around 2.3% per annum.