How to decide the best area to invest in property in the UK.
No matter whether you are a first-time investor or a seasoned professional, the same fundamentals apply when you are looking for your next investment. Arguably the most important consideration of all is where to invest.
Finding the right location can be the difference that makes your investment a success and ensures long-term profit for many years to come. In this article, we have gathered some essential tips to help you look for the right things and find the best investment markets in the UK.
The first thing to look for is a rapidly growing population – if you can find out where people are going rather than where they are now, you can buy in a growing market and make the most of the demand that will increase year on year.
This is particularly the case in city centre markets where housing is already at a premium and a large number of young professionals are attracted to the area for work and the lifestyle on offer. Manchester is the perfect example of this principle in action.
The latest figures from the City Council and the Greater Manchester Forecasting Model show that the population of Manchester is expected to grow by at least 70,000 people in the next five years, to a total of more than 625,000. Data from the Office for National Statistics shows that this population growth is approximately double the national average.
All of these people will need homes, and it is anticipated that this will put significant pressure on the luxury residential market focussed on the city centre and other Manchester investment hotspots like MediaCityUK.
A high level of population growth is fantastic news for investors and should be one of the first things you look for when considering where to invest. High demand for homes is a priority for any successful investment strategy.
Undersupply of homes
The other side of that equation is a low supply of new homes being built in the city. If the number of new properties completing and coming to market is insufficient, demand will continue growing and lead to high house prices and rental growth.
The UK market has one of the largest gaps between supply and demand that you will find, making it an ideal place to invest. It is estimated by the National Housing Federation that at least 340,000 new homes are needed each year to keep up with national population growth. In reality, fewer than 300,000 are being built every year – and this undersupply is what leads to the high demand investors should look for.
To return to the example of Manchester, despite the aforementioned 70,000 extra people expected to move to the city in the near future, the number of new homes coming to the market is nowhere near enough – only another 12,000 are set to be completed by the end of 2025, according to the Deloitte Manchester Crane Survey 2021.
Another city with a significant undersupply of homes is Birmingham, which Deloitte shows completed just over 2,000 new homes in 2020. A study from JLL shows that the city needs more than 4,000 new homes a year to meet demand, and this has led the company to predict that Birmingham will see the strongest house price growth of any city in the next five years – a total of 27% by 2026. Over the same period, JLL predicts that rents will go up in Birmingham by 15%, also reflecting the undersupply of homes. If you are looking for investment property in Birmingham, this is the ideal time to buy and secure an impressive income in the years ahead.
As an investor, if you can find a place where an undersupply of homes combines with a growing population, it is worth your attention and further research.
Infrastructure and regeneration
This leads to the obvious question – why is it that some places attract such a large number of people? The answer lies in a mix of factors that are centred around regeneration, infrastructure investment and the positive gains they bring through high-quality employment opportunities and an enhanced lifestyle offering.
In Manchester alone we can see ID Manchester, the Mayfield regeneration, the expansion of MediaCityUK, the creation of a new 23,500 seat arena, the enormous Northern Gateway project and much more. Together, these projects represent billions of pounds of investment, millions of square feet of new office space, thousands of homes, new public parks and piazzas, and a vibrant future for the city.
Manchester also has a long history of investing in its transport infrastructure and has become one of the world’s best-connected cities. The Metrolink tram system now stretches across the region, providing convenient and easy transport. More expansion is coming in the future with additional lines to nearby economic centres such as Stockport having been proposed.
Likewise, Manchester’s national rail links are being upgraded by the HS2 high-speed rail line which will cut journey times to London and Birmingham substantially:
- Birmingham Interchange, HS2 time 37 minutes (current time 1 hour 46 minutes)
- Birmingham, HS2 time 40 minutes (current time 1 hour 28 minutes)
- London, HS2 time 1 hour 7 minutes (current time 2 hours 7 minutes)
Additionally, a £1bn investment into Manchester Airport is ongoing which will expand it even further and ensure Manchester remains an accessible international hub in the long term.
This connectivity is second only to London in the UK and has drawn international giants such as Amazon, Microsoft, the BBC and many more to Manchester. In turn, this has made the city more attractive to young professionals and graduates, who are in turn pushing up house prices and rents by increasing demand for the best quality housing in the most desirable areas.
In this way, finding a location that can add infrastructure investment and regeneration to the aforementioned population growth and undersupply of homes is the ideal scenario for any investor. In truth, all three factors discussed in this article tend to fuel each other as cities like Manchester and Birmingham can attest to.
Whether you are an overseas investor, are looking to secure your children’s future, wish to generate a reliable income stream, or are investing for any other reason – investing in UK property is a good choice. By following the recommendations in this article, you are sure to find your perfect investment location and start earning income. For more information about the UK’s best investment areas, get in touch with our team today by clicking here.