Many people choose to invest in property as a long-term investment which can reap big rewards when done correctly. The UK property market is generally a buoyant one with prices rising in most areas which leads to higher rental levels, which means buy-to-let landlords can make good returns on their investments.
However, whether you’re a property mogul with an ever-growing portfolio, or just dipping your toe in the property investment water for the first time, there’re many pitfalls that even the most experienced of buyers can fall into. Deciding on which location is best to invest your money is one of the most important factors to consider, and with regional areas enjoying strong property growth, there’s a diverse range of cities for buyers and investors to explore.
So when we consider some of the main metrics such as prices, tenant demand and regeneration to name a few, which are the best areas in the UK to invest in property in 2023?
Birmingham
Average Property Price: £239,016
Average Rental Yield: 6.56%
Price Growth in last Five Years: 34.01%
Birmingham, with its ongoing regeneration works, is poised to be one of the top investment destinations in 2023. The city’s Big City Plan, a 20-year transformation project, has made significant improvements to the city centre, suburbs, infrastructure, and transport. One of the city’s biggest advantages is its affordability, with a better average income to property price ratio than the wider UK. Birmingham’s fast-growing tech and financial sectors are attracting skilled workers with high incomes, while its popularity among Londoners and a sizable student population make it a potential rental market.
Rental prices for one and two-bedroom apartments in the city centre have increased by 17.6% in the past year, according to Rightmove. Birmingham has also benefited greatly from hosting the 2022 Commonwealth Games, with significant investment in regeneration projects and world-class sporting venues. Manchester and Glasgow, previous hosts of the Games, experienced unprecedented growth in property prices and inward investment in the five years after hosting.
Leeds
Average Property Price: £247,824
Average Rental Yield: 7.20%
Price Growth in Five Years: 39.56%
Economically, Leeds is one of the fastest-growing cities in the country and rivals several European cities, enticing nearly 10% of those leaving London annually since 2018.
With a population of 812,000, Leeds is performing incredibly well in the rental market, ranking eighth in the UK for rental growth with an 11.4% increase in average rental income from Q4 2020, according to Zoopla. Although capital growth has been minimal, rental demand in Leeds is gaining momentum quickly, with Savills predicting growth of 28% in Yorkshire by 2025.
Leeds is also set to be in the top ten cities in the country for employment by 2023, creating over 19,000 new jobs, according to the UK PowerHouse report from Irwin Mitchell. The city has seen over £3.9 billion in regeneration developments over the last ten years, with an additional £7.3 billion anticipated for the years ahead, which will have a positive impact on property prices and rental incomes.
With all these factors in mind, Leeds is a strong investment choice for those seeking long-term rental returns.
Liverpool
Average Property Price: £183,512
Average Rental Yield: 7.02%
Price Growth in Five Years: 43.49%
Liverpool remains a top contender for the best place to invest in property in 2023, with strong gross rental yields of 7.02%, the second highest in the North West, according to Zoopla. Over the last five years, property price growth has been strong, with a 42% increase, yet Liverpool remains relatively affordable, with average prices being 37% lower than the national average. This, coupled with high tenant demand, means Liverpool boasts some of the highest performing rental yield postcodes in the country.
Postcodes L1 and L7 have delivered annual rental yields of 8.1% and 10%, respectively, and JLL predicts that property prices in Liverpool will rise by 21% over the next four years into 2026, benefiting from similar growth as Manchester.
Liverpool also has an excellent income-to-house price ratio at 4.9, highlighting its affordability when measured against the strength of its workforce. Regeneration is also underway, with the Liverpool Waters scheme being one of the most impactful for the city, a £5 billion, 30-year plan aimed at delivering new spaces, bringing in more tourism, and creating nearly 17,000 new jobs.
Manchester
Average Property Price: £238,861
Average Rental Yield: 5.71%
Price Growth in Five Years: 38.29%
Manchester has established itself as one of the most exciting locations for property investment, continuing to live up to its “northern powerhouse” hype. The city has seen some of the best capital appreciation returns on this list over the last five years, ranking in the top three locations for price growth in the North.
Future growth looks set to continue, with property prices in the North West expected to rise by 17.4% over the next four years according to JLL’s house price forecast, with Manchester offering a great alternative to London, with extensive career opportunities in global businesses.
With 38.7% of the population between 18 and 35 years old, the city has a wide rental market, and The Great North Rail project has provided better connections to key areas of the North, increasing tourism for Manchester significantly.
Newcastle
Average Property Price: £198,347
Average Rental Yield: 7.70%
Price Growth in Five Years: 25.53%
Newcastle is the most populous city in the North East and one of the most affordable locations mentioned in this blog, driving some of the best rental yields in the UK. Postcodes such as NE1 and NE6 offer high yields (around 8% – 9.2% respectively) at the heart of the city, with the average yield sitting at 7.7%. Despite this, Newcastle’s average property price is still 33.6% lower than the UK average, presenting a great opportunity for property investors to make great returns.
As one of the leading university centres and with one of the best graduate retention rates in the country, Newcastle is also recognised as one of the fastest-growing regions for new start-up businesses. This will likely boost demand from young professionals, increasing rental prices and yields. The city hosts a variety of corporate headquarters, as well as strong education and digital sectors, providing a range of career opportunities that drive demand and support the entrepreneurial side of the city.
So with all of this information under your belt, we hope we’ve given you an insight into the property investment market and offered some food for thought when deciding which location to put your money in!
