Property investment has long been renowned as one of the world’s most trusted assets. And property investment in the UK in 2020 is particularly appealing due to its ability to deliver a regular income and long-term growth, even during times of wider uncertainty. With these factors in mind, its no surprise that it consistently remains one of the most in-demand global assets.
Overall, UK property market continues to be a profitable and reliable option for any investor, whether this is your first venture into the world of buy to let or you are a professional portfolio landlord. So, as more people look to invest for the first time, or add more properties to their portfolio, here’s one of the most important questions – where are the best places to invest in UK property?
Perhaps the most important consideration for any investor is the question of location. Properly researching where to put your money can be the difference between a successful investment and one which fails.
How to choose a location for property investment?
There are a number of factors that help make a city a good proposition for property investment in the UK in 2020.
The cities that have strong price growth and the best rental yields in the UK all have several things in common:
- Sustained economic growth
From new infrastructure projects to businesses opening new offices, a thriving economy should be one of the first things you look for when choosing a city to buy UK property.
- A rising population
Economic growth creates more jobs, which in turn means more people moving to live in the city. Choosing a city with positive population growth projections will also ensure you don’t buy in a location where property supply is likely to outstrip demand.
- Low property supply
The best cities for investment have a tangible undersupply of property versus demand from potential buyers and tenants. This ensures you can achieve premium rents and high asking prices.
- First-class universities
Having prestigious universities and institutions nearby will not only sustain population growth, but a high graduate retention rate of students remaining after their studies have finished will also have long-term economic benefits for the city.
- Good transport links
Easy access to international airports and major rail and road networks will not only increase a city’s attractiveness as a place to live, but it will also ensure high leisure and business tourism levels, too.
The best places for property investment in the UK:
One of the top cities for property investment in the UK is Manchester. The city’s property market is a rare combination of being both well-known among investors, but still on an impressive upward trajectory. Affordable entry prices and a booming population complete the perfect picture for investors.
The forecast for Manchester’s property market in 2020 is extremely positive, with the rate of house price growth sitting far above the national average and demand still shooting up. It is estimated that almost 50 developments will complete in the city over the course of 2020, but with an additional 5,000 people a year set to move into the city centre according to Manchester Council, that still won’t be anywhere near enough to satisfy demand.
The city has one of the UK’s fastest-growing economies and is particularly strong in the sectors most likely to attract young professional workers to the city. For example, Manchester has been named the tech capital of the UK following its tech sector seeing a 277% increase in investment over the course of 2019. Momentum such as this has put the city on the map, and house prices are being pushed up as a consequence.
The next property investment hotspot is Birmingham. The city is in the heart of the West Midlands, with the region being one of the country’s biggest economies and most in-demand locations for young professional renters.
Much like Manchester, Birmingham is enjoying the benefits of many huge developments that are revolutionising the city and putting it on the global stage. The city’s office market is a good signifier of how quickly the city is expanding, with more than 775,000 sqft being delivered in 2019. This represents an increase of approximately 50% over the previous year with an additional 1.1 million sqft still under construction.
Furthermore, several multi-billion-pound developments such as the Big City Plan are transforming the city centre, making it a perfect modern hub that is incredibly attractive to people and businesses alike. Companies like Deutsche Bank, KPMG, PricewaterhouseCoopers, and DLA Piper have all chosen the city as their base for good reason and they are bringing young professionals with them. This is a positive for any buy to let investor looking at the Birmingham luxury property market. It is no surprise that the latest JLL West Midlands Residential Report projects house price growth for Birmingham of more than 16% over the next three years.
London has historically been considered the UK’s premier buy to let investment market, but recent years have seen the capital lose that title. An unfortunate combination of rapidly increasing house prices and falling rental yields has taken London out of consideration as a long-term investment destination for most serious, long-term landlords.
The latest Rightmove Rental Tracker shows that rents only increased by 0.4% year-on-year in London over the course of Q1 2020. This is a quarter of the national average (2.4%) and less than 10% of the annual growth seen in the North West (4.6%), an area built around the booming Manchester market. What’s more, this is the continuation of a long-term trend of rental yields falling in London.
Likewise, even London’s much-cited house price growth appears to be lagging far behind other more vibrant markets. The latest Cities House Price Index from Hometrack shows annual growth in the capital of just 0.9%. Not only is that far below the national average, but it is also approximately a third of the growth seen in Birmingham and a quarter of that in Manchester over the same time period.
In the current climate, London cannot be recommended as an attractive destination for property investment. The long-term trends are not as strong as they once were, and greater profitability, not to mention stability, can be found in regional property markets such as Manchester and Birmingham, as mentioned previously.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.