Some would say this is a quite unique period in terms of property investment in the UK, because there may be strong returns to be made from both the buy-to-let and capital appreciation markets. The UK continues to offer a huge rental pool and also strong property growth in certain areas; with one undoubtedly having some influence over the other.
The continuing Brexit farce and a first interest rate rise in ten years in 2017 are each a natural barrier to some tentative investors, but while there is another interest rate rise planned for 2018, this will only result in a 0.75% base rate, and with more than half of all UK mortgages on a fixed rate, most people will remain unaffected. And with the Government committed to schemes to build new houses and assist first time buyers, there is no dip in enthusiasm for those looking for the best place to invest in property in the UK in 2018. So where do you look?
It’s a long time since property prices in London were affordable to the average Joe and that is unlikely to change any time soon. So people are increasingly looking to invest in areas with commuter links to the capital, plus a sense of forward momentum as a place to live.
Sir John Betjeman may have longed for friendly bombs to fall on Slough, and the town was depicted in The Office as a faceless, post-war concrete afterthought, but in 2018 4,600 businesses are located in the area, including corporate heavyweights such as Unilever, Honda, Ferrari and O2. Crossrail construction is also about to make journey times to key London stations much more attractive to young professionals, and it was reported by Countrywide that more homes in Slough (46%) are let to a tenant that has moved from London than anywhere else in the country.
Stevenage has also experienced a huge rate of growth, with the average house price increasing 58.5% between 2007 and 2017. With a direct rail link to King’s Cross and making a name for itself as the new £1billion home for Google, Stevenage might be another unlikely name to make a note of.
If you do have financial muscle to monitor the property market in the capital, the gentrification of downtrodden and stigmatised boroughs continues. The search for the next Camden or Notting Hill has seen areas such as Lambeth rise in value. While Hackney has seen an astonishing 750% rise in property prices over the last twenty years.
A recent KPMG report pinpointed Yorkshire, the North West and North East as the areas expected to see the UK’s highest average house price growth over the next decade. As such it is no surprise to see big cities deemed as being part of the Government’s ‘Northern Powerhouse’ feature strongly in many people’s thoughts about the best places to invest in property in 2018.
Manchester has seen strong business investment in recent years alongside regeneration projects such as Salford Quays, Media City and the Northern Quarter. This all improves the economy, the standard of living and of course the property investment market. Like London, Manchester is also surrounded by many attractive ‘commuter belt’ conurbations such as Fallowfield, Salford and Chorlton, with house prices rising rapidly and rental yields twice those available on average in London.
Leeds has made similar strides from being labelled as a traditional industrial eyesore and is now a stylish and modern, cosmopolitan city and a prime retail and cultural destination. With a thriving student culture and a fertile city centre living movement, Leeds has a strong rental market and capital appreciation. Meanwhile, the impending HS2 project can only improve its accessibility and attraction.
With house prices so strong in many areas of the UK, it is not surprising that the rental pool is very high as people struggle to get on the property ladder. As a result, some major towns and cities in the UK represent a more attractive investment option for those looking to buy-to-let.
Glasgow has a very young demographic, with 28.5% of its population aged between 21-35. So as a natural consequence, Glasgow enjoys some of the best rental yields in the UK at 6.9%. Newcastle has suffered somewhat from a media perception of a distant northern outpost with little class, but it has quietly become a fast-paced city with charm and character. With good transport links via the Metro it is an affordable option for young professionals and hence will appeal to those looking to increase their buy-to-let portfolio, rather than homeowners who may not see a great return from a slow 0.17% rise in property prices in the last three months of 2017.
Liverpool and Nottingham represent perhaps the best opportunities to make money from the buy-to-let market. Buy-to-let specialists Private Finance ranked them joint first as the best performing rental yields in the UK, both offering returns of 6.2%, after mortgage costs are factored in.
Long term profit for private landlords is a fine balancing act between careful investment and choosing the right location. Both Liverpool and Nottingham offer affordable properties, in an improving market and with strong rental demand, and hence they certainly carry less risk for those looking to invest.
2. www.cml.org.uk "Are Mortgage Borrowers Prepared For Rising Interest Rates" by James Tatch
11. www.thisismoney.co.uk"Where Should You Invest In Buy-To-Let in 2018" by Sarah Davidson