Best buy-to-let cities in the UK 2019: Where the experienced are investing in property.
UK property in 2019 has become even more exciting than any other year. With the maturity of government schemes to increase power of cities outside of London, and the capital itself becoming so expensive that it has slowed growth, investors made significant growth in new territories over the last few years.
Understanding new growth area’s can be relatively simple with the correct methodology. Where are governments investing, where are significant institutional investors spending money, where are major companies locating too, and where are significant infrastructure improvements being made?
When all of these factors come together we get hotspots of investments which are expected to return growth over the next 3-10 years. The benefit of buying in growth area’s will also see the smart investor achieve higher yields than mature parts of the city.
For the investor with a higher budget and wants to stay in London, Earls Court has the potential to be one of the significant wins to be had in the city.
Capco, who are redeveloping the area off the back of its Covent Garden success is planning 10,000 new homes in this West London location.
Investors can quickly get in here at square foot prices significantly below its neighbours, with a long term growth potential should the masterplan go ahead.
Holding out to see this masterplan released may show some key opportunities which we will be keeping a close watch on at Baron & Cabot.
Key Stats:
Expected next 5 years: 12% (JLL)
Average Yield: 3.5%
Average property price v average earnings: 12
Number 4: Leeds
About 10 years ago Leeds was seen as being over supplied with investment property. This rumour which likely had some accuracy at the time, led to a massive drop in construction resulting in a position now of a great city with a huge undersupply of property.
Leeds has every right to have ambitions of matching Manchester and Birmingham in terms of economic performance and having one of the largest banking and legal industries outside of the capital packs some serious short and long-term results for investors.
The capital of Yorkshire is not delivering significant savings with many new developments, keeping us away from some of the new developments, however there are some smaller developments which can deliver both value and yield.
The Southbank project in Leeds, south of the river which will double the size of the city is where most long term investment returns will be delivered, however SOYO and Mabgate area’s are equally worth investigating with slightly smaller investment zones delivering returns slightly quicker than the long term of Southbank.
Investors should be wary of price point with many developers being over ambitious in asking prices, however the city itself at the correct prices should certainly be seen as value, cheaper than Birmingham and Manchester with significant demand.
Key Stats:
Expected next 5 years: 19.9% (JLL)
Average Yield: 6.5%
Average property price v average earnings: 6.27
Number 3: Liverpool
The city known globally for the Beatles and historically for its shipping has since blossomed into an economic strength in the Northern Powerhouse.
The city has gone from strength to strength and had been overlooked by many investors until recently.
Greg Malouf, the charismatic Australian developer behind the success of Liverpool’s waterfront, in partnership with Peel Holdings was amazed that a waterfront city, with so much economic output had been so overlooked, we share that sentiment.
2019 is likely the last chance we will get to buy in at under £150,000 for key waterfront developments. While there are cheaper area’s of the city, growth will be slower than on the waterfront where tenants will naturally look to.
Yields in the city due to the price points are higher than the likes of Leeds, Birmingham and Manchester, although growth is likely to be a slightly longer process as the cities new area’s come to shape.
The key investment area is Liverpool Waters on the historic waterfront. Being developed by Peel Holdings, the developers who transformed Media City in Manchester from wasteland to one of the key area’s of the city have taken on this masterplan which has been 10 years in the making.
Look for true waterfront as the first point of call, within the traditional wall’s of the waterfront, these developments are generally brick built in line with local governments plan to make this area a ‘mini Amsterdam’.
Key Stats:
Expected next 5 years: 19.3% (JLL)
Average Yield: 6.5%
Average property price v average earnings: 4.7
Number 2: Manchester
Like with its competition Birmingham, Manchester has seen incredible growth over the past 10 years, and is poised to see further strides over the next 10 years. Low stock levels and high demand has seen competition for land and property being at an all-time high.
Politically and economically stable Manchester has been in high demand for local and international investors, with the city leading the way in Europe with some of the best investment of government money completely transforming the city.
The threat of over supply suggested by some investors does not stack up against the numbers of property needed in the city. The need for quality accommodation is at a critical point with the capital of the Northern Powerhouse retaining its graduates, while taking companies from London and their staff.
The creativity and diversity of the city, with some of the best economic output of any city in the UK Manchester should have been and continue to be on any investors to do list for investments.
Key city centre locations are now starting to deliver lower yields due to the price points, however there are spots such as Blackfriars, Middlewood Locks and Ancoats which are still delivering good value, high yields and huge capital growth potential.
Don’t expect bargains in Manchester, do however expect that your investment will be in a mature city with existing infrastructure and huge growth potential.
Key Stats:
Expected next 5 years: 22.8% (JLL)
Average Yield: 6%
Average property price v average earnings: 5.74
Number 1: Birmingham
In at number 1 spot is Birmingham. Over the last few years Birmingham’s property prices have grown at an astronomical rate and will continue to do so. Being centrally located in the UK, when the HS2 line comes rocketing into the city in 38 minutes from London, Birmingham will cement its position as the most accessible city in the UK.
With major companies re-locating to the city, graduates staying due to the achievable rents and high-quality social scene the UK’s 2nd city is primed to make growth similar to those achieved by London investments many years ago.
With a current and ongoing problem with under supply, and high competition for central land, Birmingham property prices are seeing constant upward pressure, which will intensify each year up until and immediately after the HS2 arrival and the planned tram links between the two Birmingham HS2 stations.
As you will have read in the article ‘What causes property prices to go up and down’ Birmingham has an average property price of 5.59 the average salary, where London is 12-14 times average salary. Birmingham could legitimately see growth to 10x average salary before a slowdown, meaning average property would be £350,000.
Key growth area’s to look at are Sheldon and surrounds, which take in the first stop of the HS2 and is one of the fastest selling, and best valued parts of the city, Digbeth/ Curzon, where the 2nd HS2 station will be located, and area’s surrounding Broad Street and Brindley Place.
More mature spots such as financial area’s will see the most premium property growth with more wealthy individuals being based in the city expecting the highest spec developments.
Tony Pidgley, The Founder and Chairman of Berkeley Homes, a traditional long term luxury spec central London developer have also jumped into the growth of Birmingham, making their first ever developments out of the capital and planning 3,000 new properties per year in Birmingham.
He said “I don’t have any doubt that in the next decade you will become one of those world-class cities.
“With the Smithfield and all the other things you are ambitious about, you will have all those things.
“You are a city which is on the up.”
Key Stats:
Expected next 5 years: 20.5% (JLL)
Average Yield: 6%
Average property price v average earnings: 5.59
In conclusion
Investing in these areas for your next buy-to-let investment gives some of the best chances of returns, however by no mean guarantee. Within the locations there are areas where you should be investing, and those which you most certainly shouldn’t.
Equally there are properties, both completed and off-plan which will perform better than others, and significantly worse. Knowing the quality of a property, the lease details and price points – which are covered in our other articles will support you in making the best returns for your investments.
Speak to a broker at Baron & Cabot on our chat below (if you are shy) or give us a call on 0203 287 8282.