Best Places to Invest in UK Property 2021

 

After the challenges of 2019 and Brexit, the UK property market entered 2020 with a degree of optimism. Obviously, what followed wasn’t part of the plan. And yet, despite the strains of lockdown, the property market continues to defy gravity. As the mini-boom continues across the country, investors are already looking ahead to the best places to invest in UK property 2021.

Every region in the country recorded a rise in house prices in September according to the most recent RICS survey – hitting an 18-year high. At the same time, demand continues to rise with seemingly no end in sight, driven by changing priorities for homeowners and the stamp duty holiday introduced by the government.

This means that heading into 2021, there are a number of UK Buy-to-Let hotspots now vying for the spotlight. As regional cores continue to surge ahead of traditionally popular markets, we’re examining the question: what are the top 10 best places to invest in UK property in 2021?

Best UK Buy-to-Let Property Investments

 When we talk about the ‘best’ places to invest in UK property 2021, there’s a number of factors to consider. While some of these are obvious, it’s important to get a clear idea of what makes a good Buy-to-Let investment before we jump in. Key metrics we look at are:

Property Prices – Rental Yields – Tenant Demand – Population – Regeneration – Career Opportunities – Tenant Demographics – BTL Opportunities – Transport Links

This allows us to build a complete picture of a location’s Buy-to-Let performance while also highlighting emerging towns and cities that might not be traditional options for investment.

Download the 2021 UK Investment Guide

Looking to make an informed decision about your next investment? Download the only investment guide you need. Filled with insights into the market, the 2021 UK Investment Guide covers forecasts for rental yields, property prices and new developments over the year ahead.

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Birmingham

 

Birmingham remains one of the top places to invest in 2021, continuing a run of form that started in 2016. As more projects within the Big City Plan come to fruition, demand has never been higher for the second city – just as preparations for the Commonwealth Games 2022 come online.

One of the biggest advantages Birmingham holds is its affordability. Knight Frank research shows that the average income to average property price ratio is much better in Birmingham than across the wider UK – the city is attracting and retaining skilled workers that have the income to spend in this rapidly growing city.

Average rents have risen by 30% over the last 10 years and are expected to rise by 15.9% over the next four, boosted by tenant demand from young professionals leaving London and a rising population set to hit 1.24 million by 2030.

With a market largely made up of one and two-bedroom apartments – at least in the increasingly popular city centre location – rental yields are averaging between 4.7% and 5.3% for property investors in these asset types, while a solid development pipeline is delivering new standards of quality such as St Martin’s Place.

Finally, some of the strongest connectivity foundations in the UK are being improved with new transport links. The Midlands Metro expansion continues to offer unprecedented access to emerging West Midlands destinations while work has begun on HS2 – a generational development that will revolutionise Birmingham.

Birmingham Key Stats

Average Price:

£202,162

Average Rental Yield:

5.4%

Price Growth in Five Years:

14.2%

Manchester

Manchester

 

Manchester continues to be the northern powerhouse it was originally hyped to be – establishing itself as one of the most exciting locations for investment.

With some of the best capital appreciation returns on this list over the last five years – including a huge rise between 2017 and 2018 – Manchester has led the way for price growth in the North.

Future growth looks set to continue the trend, with property prices expected to rise by 17.1% according to JLL. This can largely be attributed to the city’s rapidly growing economy and population, which have both made incredible strides over the last few years.

Across the lettings sector, Manchester remains a clear alternative to London. With a host of career opportunities in global businesses and employment growth of 84% between 2002 and 2015, the city is now the top destination for young professionals in the North West and only beaten out by Midlands destinations such as Birmingham according to Hamptons International.

In terms of future development, the Great North Rail project is expected to come into effect by 2022 and will allow 40,000 more passengers to travel throughout key cities in the North – increasing tourism for Manchester significantly.

Manchester

Average Price:

£242,311

Average Rental Yield:

5.37%

Price Growth in Five Years:

15.76%

Liverpool

Liverpool

 

Liverpool remains a clear contender for best place to invest in property 2021 due to the rental yields it can provide. While price growth has been weaker over the last five years than some other alternatives, Liverpool boasts some of the highest performing rental yield postcodes in the country.

L1, commonly known as the Baltic Triangle, is one of Liverpool’s trendiest places to live and has delivered 8.1% annually in the past. Across the city, L7 hosts the Royal Liverpool University Hospital and has been known to deliver annual rental yields of 10%.

JLL predict that property prices in Liverpool will rise by 13.1% over the next four years, slightly below nearby Manchester and Birmingham to the South but still one of the highest rises going forward.

Liverpool also has an excellent income to house price ratio at 4.9, which highlights its affordability when measured against the strength of its workforce.

In terms of regeneration, the Liverpool Waters scheme will be one of the most impactful for the city – a £5.5 billion plan aimed at delivering new spaces, bringing in more tourism and creating nearly 17,000 new jobs.

Liverpool

Average Price:

£186,527

Average Rental Yield:

5.30%

Price Growth in Five Years:

8.45%

Nottingham

Nottingham

 

A ‘sleeper hit’ for the UK property market, Nottingham has been making huge strides over the last few years and now represents a key investment area.

More affordable than other major cities such as Manchester, Nottingham offered quality yields of around 9% in several city centre postcodes including NG1 (the city centre) and NG7 (the surrounding area which also includes the University of Nottingham) in 2019, although that has slowed since lockdown.

Nottingham’s major strength is in it’s past capital growth and future long-term yield growth, which is set to be one of the strongest in the country according to JLL.

Driven by two major UK universities located relatively close to the city centre, there is a huge amount of tenant demand supporting these yields, alongside a booming creative quarter that is serving the growing graduate pool.

Nottingham is also home to Queens Medical Centre – a ‘super hospital’ in the region and one of the largest teaching hospitals in the country, with over 6,000 medical staff adding to the growing demand for accommodation.

Nottingham

Average Price:

£214,435

Average Rental Yield:

4.66%

Price Growth in Five Years:

16.92%

Newcastle

Newcastle

 

The 8th largest city in the UK by population, Newcastle is one of the most affordable locations on this list and thus, driving some of the best rental yields in the UK.

While postcodes such as NE1 and NE2 are offering high yields (around 6 – 7%) at the heart of the city, Newcastle has faced challenges in terms of capital growth over the last five years.

That said, Newcastle has one of the best graduate retention rates in the country and is recognised as one of the fastest growing regions for new start-up businesses. This will likely boost demand from young professionals, which will in turn increase rental prices and thus, yields.

Hosting a variety of corporate headquarters, as well as strong education and digital sectors, there is an established standard of career opportunities that assist with driving this demand while supporting the entrepreneurial side of the city.

Newcastle

Average Price:

£198,307

Average Rental Yield:

6.50%

Price Growth in Five Years:

6.20%

Leeds

Leeds

 

Another major force in the North, Leeds has quickly become recognised as a key city for investors seeking long-term rental returns.

Home to 800,000 people, 73% of the households in Leeds are currently renting, making this a dream for investors looking for consistent tenant demand.

While capital growth has been minimal compared to others on this list, rental demand in Leeds is gaining momentum quickly. JLL predicts that the city will see 13.7% growth over the next five years, driven by the aforementioned demand as well as a number of Build-to-Rent schemes being delivered.

Economically, Leeds is one of the fastest growing in the country and now rivals several European cities. This is having a huge impact on the opportunities available within the city, enticing nearly 10% of those leaving London annually since 2018.

Leeds

Average Price:

£268,037

Average Rental Yield:

5.10%

Price Growth in Five Years:

9.40%

Edinburgh

edinburgh

 

Edinburgh remains a stalwart of the best places to invest in the UK due to its excellent price growth over the last decade.

While prices going up have lowered rental yields somewhat, Edinburgh still remains desirable with tenants, ensuring less turnover in an investment property.

JLL also predicts that Edinburgh’s economy will continue to rise, positively impacting property prices to the tune of 17.1% over the next five years – the joint highest growth rate of any UK city.

In terms of future development, there has been an influx of new-build city centre apartment opportunities across the multifamily (build to rent) and private rented sector, despite pressure from alternative markets such as student housing.

Edinburgh

Average Price:

£333,691

Average Rental Yield:

4.19%

Price Growth in Five Years:

12.33%

Bracknell

Bracknell

 

With London still struggling to recover, a number of key towns in the South East have taken the limelight, offering more affordability and still delivering connectivity with the capital.

Bracknell is one of these towns. Home to a number of globally renowned businesses such as Dell, Microsoft and 3M, it’s also experiencing the kind of large-scale regeneration that attracts incredible demand.

This new town has seen price rises of 249% over the last 20 years and is still nearly half the price of the average London property, ensuring higher yields – 3.98% in Bracknell versus 3.04% in London.

Furthermore, a £770 million regeneration plan is impacting property prices positively, contributing to Knight Frank forecasting rises of17% on average over the next five years.

For investors interested in targeting the young, commuting professional demographic near London, Bracknell represents the opportunity to take advantage of long-term growth and consistent yields.

Bracknell

Average Price:

£383,788

Average Rental Yield:

3.98%

Price Growth in Five Years:

11.02%

Sheffield

Sheffield

 

Last year we mentioned that Sheffield was at the start of its property cycle and showing incredible potential. This year we see Sheffield start to achieve that potential, particularly in terms of delivering rental yields for investors.

Thanks to around £480 million being spent on developing Sheffield’s shopping district, Sheffield’s local authority continues to create the amenities to deal with rising demand. This has directly impacted central postcodes such as S1 where yields have hit around 7%.

Sheffield has also been one of the top markets coming out of lockdown, where sales were up 20% higher than at the start of the year according to Zoopla.

Sheffield

Average Price:

£209,405

Average Rental Yield:

5.00%

Price Growth in Five Years:

11.41%

Glasgow

Glasgow

 

While Glasgow property has always been in the shadow of Edinburgh, the second city of Scotland is starting to emerge.

Glasgow’s economy is set to perform on par with Edinburgh over the next five years and its property market demonstrates this.

Sale prices are expected to rise by 15.4% over the next five years, while rental growth is expected to rise by 13.4% over the same period. This follows five years of excellent capital appreciation and will be welcome news for investors looking to Scotland.

With a solid development pipeline of 4,000 purpose-built rental homes and ‘multifamily’ schemes, the parts are in place to support Glasgow Council’s recent commitment to double the city centre population by 2030.

Glasgow

Average Price:

£194,545

Average Rental Yield:

5.20%

Price Growth in Five Years:

15.05%

Best Areas for UK Property Capital Gains

For those that want to invest in property for capital gains, these are the best areas for property price growth:

Capital Growth Table

Source: Zoopla, JLL

 

Here we can see the true impact of London’s decline and how regional markets have steadily become the best places to invest in UK property 2021. While Manchester and Edinburgh are leading the way for future growth, they’re also the two most expensive markets on the list.

Following close behind is Birmingham, which is the most affordable English city on the list and is still only forecasting 0.6% less growth over the next five years. This also highlights the second city’s core strength which is its rental yields.

Finally, Nottingham has seen the best growth over the last five years as it’s grabbed the spotlight but is predicted to drop off slightly over the next five years and will see the lowest growth in the list with a still respectable 14.8%.

Best Areas for UK Property Rental Yields

For those that want to invest in property for rental income, these are the best areas for property rental yields:

Capital Growth Table

As you’d expect, some of the more affordable locations on this list are delivering the best rental yields. Newcastle is currently achieving yields of 6.5% thanks to the strength of its workforce and career opportunities.

Similarly, Liverpool’s excellent yields can be attributed to its average income to house price ratio, which is one of the best in the UK.

Birmingham and Manchester are set to deliver the best rental growth which puts them firmly at the top of the best places to invest in UK property 2021. Their exceptional performance is largely buoyed by the strength of new developments, increasingly high demand and a lack of supply driving up rental prices.

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