10 Minute ReadSummary
Investing in the wrong area can really hinder your property investing journey and take more time to gain enough equity to move onto the next project or find the right return on investment.
Where as, investing in the right area can help you see fantastic capital growth and benefit from growth on the entire price of the property by up to 7% in a single year which is bonkers.
The market over 2020 has been somewhat crazy and it was the same in in 2021.
We’re going to deep dive into lots of data out there, look beyond the headlines and explore the best buy to let areas for this year!
It doesn’t mean these are the only places where you should be buying, and it also doesn’t mean you can just buy any old property and it’ll work out – do your research, know your area, invest at the right price make sure you run the numbers on every property you are looking to make an offer on, factoring in all the relevant costs.
Investing in the wrong area can really hinder your property investing journey and take more time to gain enough equity to move onto the next project or find the right return on investment.
Where as, investing in the right area can help you see fantastic capital growth and benefit from growth on the entire price of the property by up to 7% in a single year which is bonkers.
The market over 2020 has been somewhat crazy and if I’m completely honest, I think it’ll be the same in 2021. Of course that’s my own opinion and anything could happen, nobody truly knows. We’re going to deep dive into lots of data out there, look beyond the headlines and explore the best buy to let areas for this year!
It doesn’t mean these are the only places where you should be buying, and it also doesn’t mean you can just buy any old property and it’ll work out – do your research, know your area, invest at the right price make sure you run the numbers on every property you are looking to make an offer on, factoring in all the relevant costs.
The Property Market Right Now
Taken from Zoopla
Demand for property has soared by an incredible 49% in January, in the biggest New Year bounce that we’ve seen for five years.
Record demand was recorded for all different property types, as buyers searched for both houses and flats, according to our latest House Price Index.
The increase in buyers was the same with the record levels of interest seen during the stamp duty holiday in 2021, and suggests the search for space still has further to run until we find a new norm.
The spike in activity helped push up the average cost of a UK home to £242,000, compared with £216,500 this time last year.
What's happened to house prices?
Property prices have increased by 7.4% in the year to the end of December, with increases for houses continuing to significantly outstrip those of flats due to the ‘race for space’ since the pandemic.
Across the regions, Wales led the way for the 11th consecutive month with property values rising by 11.3% in total, followed by the North West at 9.2% and the South West at 9.1%.
London chas ontinued to dwell and linger, posting increases of just 2.6%, although a third of the capital’s boroughs saw price growth of more than 4%, especially higher gains in the East of London.
The Hot Property Market
Throughout January I’ve been viewing properties left, right and centre – speaking to estate agents and trying to find my own very first property deal and it has been a great learning experience but also eye opening at how hot the market is just now. Properties are selling for crazy prices and I’m seeing lots of other investors say the same thing on Instagram, YouTube and on Podcasts.
So, lets take a look what’s happening as of January and how we started the new year – as you can see, data from Zoopla is showing that demand is almost 50% higher versus this time last year, but to make things even more challenging – new supply on the market is a bit slow due to the lockdowns and sellers are reluctant to put their homes on the market.
This creates a scenario where property prices are increasing – this is classic supply versus demand and of course things are fuelled by the stamp duty tax break.
So this means that if you’re looking for an investment property this year, at the moment things are hard – the market is really hot and this means that houses are going for over asking price or from an investment point of view they’re going for breakeven points which means there’s £0 profit in the deal.
For example, I was looking at an auction property that happened on January 26th, the guide price was £60k – £70k, average properties in the area are worth around £95,000 at a push. This is for a standard 2 or 3 bed terraced house in Sheffield and the auction ended up going for £90,500 – this is just insane.
Hopefully things will begin to change this year, with the stamp duty tax breaks ending and hopefully things begin to ease off with the virus that the market does get properly going again and good deals return to the market, it’s just a matter of waiting for things to take a bit of a positive turn for investors – but we’re during the explosive phase in the property cycle so things aren’t expected to calm down.
So, now we’ve looked at the property market as a whole, where are the best areas to be investing for buy-to-let property this year? Well at the moment they aren’t changing drastically year on year – typically these are thriving cities in the midlands and the north where property prices are increasing the most.
Where are house prices rising the fastest?
- Liverpool is paving the way with 10.7% YoY Growth
- Manchester is second with 8.5% YoY Growth
- Nottingham is third with 8.1% YoY Growth
- Sheffield is fourth with 8.0% YoY Growth
- Leicester is fifth with 7.9% YoY Growth
As well as the data, you should also look at each city for regeneration, transport projects and just generally what does it have going for it
Is Nottingham a good place for buy to let?
Nottingham has been performing quite well over the past 2 to 3 years and It’s becoming a more desirable place, there are lots of great jobs, a wide mixture of housing and you have a mixture of city centre living along with countryside homes that are 15 minutes away from the city.
There are large regeneration projects like in Beeston called the Beeston Square redevelopment which is a £50 million development creating a cinema, restaurants, drink outlets and 132 new homes.
More recently, planning permission has been granted for the first phase of Nottingham’s £650 million Island Quarter, the city’s biggest regeneration scheme in decades.
Nottingham can be great for families but also would work well for HMO properties due to the two universities in the city with lots of students and young working professionals. I know a few investors around Nottingham and they are absolutely killing it at the moment with incredible projects.
Lastly, the transport links for Nottingham are fantastic, being located pretty much in the middle of the country with direct links to London, Manchester, Birmingham, Sheffield, Derby and is situated right next to the M1 motorway, this will also massively help property prices being so ideally located.
This is especially as important in a post-virus world where we probably won’t be in the office 5 days a week so a 1hr 40 train to London might not be so bad if you’re only doing it once a week, so you benefit from London salaries and non-London living.
So when hundreds of millions of pounds worth of regeneration is happening in a city, with great transport links to London and all over the country – no wonder Nottingham is increasing up to 6% a year and I think even though that growth has started – it still has a long way to go.
Is Manchester a good place for buy to let?
Another great city and Manchester really is powering the north at the moment, It’s the second best city outside of London and the growth and boom at the moment is staggering. I genuinely believe Manchester in 30 – 40 years time will be similar to London property prices.
Manchester less built up that London meaning beautiful victorian houses are no more than 15 minutes away from the city centre and still have a countryside feel. That expansion London has had over the past 50 years hasn’t quite happened in Manchester, everything is smaller and more easily accessible and property prices are way more affordable.
There are LOTS of big companies occupying brand new buildings in the city meaning major global employers are offering great jobs and salaries for workers which is bringing in a lot of money to city. This on top of BILLIONS of pounds of investment going into Manchester really is making it the place to buy a property. We’ve already seen huge industries like Media move into the city creating MediaCity UK along with a booming tech industry that’s growing with companies like Booking.com opening up HQ offices.
Trains are 2 hours direct from Manchester to London on the west coast line and you’ve got easy access to Sheffield, Birmingham, Liverpool, Leeds and lots of other big cities in the north. I think we’ll see a boom in Manchester for a long time to come so now really is the time to get into that boom in Greater Manchester.
Similar to Nottingham, you’ve got two fantastic universities, great employers and it means that multiple property strategies work well in Manchester from simple buy to lets, HMO’s for students and young professionals and even serviced accommodation for visitors, tourists and events where people need to stay for a night or two in and around the city.
Long term – Manchester I think will be one of the biggest performers before we see the next crash, but even then – I think Manchester would recover quite quickly after the next property crash based on all the prospects it has going for it.
Is Liverpool a good place for buy to let?
Liverpool, another northern city that has been growing really well over the past few years but a big difference between Liverpool and Nottingham / Manchester is that Liverpool has been a lot slower to recover from the property crash of 2008.
So currently in 2021, Liverpool is only 7% above the 2007 peak before the crash.
Now, this tells us two things. Firstly, that Liverpool has obviously been a lot slower to recover from the economic recession of 2008 but when you look at Manchester and Nottingham which are both more than 30% higher than their 2007 peaks, the question is – does this mean that Liverpool still has a lot of potential to increase in price? Especially as Liverpool is near Manchester, we could start to see a ripple effect going outwards like we’re already seeing in Greater Manchester, Warrington and other surrounding places.
In terms of what Liverpool has going for it, it has become a bit of a property hotspot over the past 2 or so years with property prices remaining quite cheap compared to the rest of the country, investors and buyers are looking to snap up the typical Liverpool terraced house to either keep as a buy to let or convert into an HMO and ultimately all this demand is driving up prices so it’ll be interesting to see where this keeps going.
Transport links are good with connections to Manchester which ultimately will give you access to London, Leeds, Sheffield, Nottingham, Birmingham and many major UK cities.
The other thing to keep an eye on is similar to Manchester and Nottingham, liverpool is getting millions of pounds of investment pumped into it which can only be a good thing. One of the biggest regeneration projects is called Liverpool Waters, which is a £5.5bn investment into the city to create luxury apartments, high rise buildings, leisure facilities and together this will mean building 5 entire neighbourhoods into the abandoned docks areas where the development is planned.
You could imagine in a few years, property around here will be worth a premium, especially when surrounded by tall glass buildings it will become more desirable and improve the area around it bringing jobs and people to live and work around there.
Is Leeds a good place for buy to let?
So – Leeds is a little gem that investors and buyers are beginning to talk about more and more, the boom has begun but it hasn’t truely got going yet like we’ve seen in Manchester and Nottingham, if you imagine this on a curve, it means that Leeds still has some time where it’ll do ok, but the boom hasn’t really kicked off.
So if you get in early – in a few years you could really reap the rewards of Leeds as it becomes more popular. Leeds is one of the biggest financial centres for jobs and workplaces outside of London and is the financial hub outside of London for the UK with employers across banking, insurance and other general financial services.
Again from a transport perspective, there’s direct trains to London down the east coast mainline and you have easy links to York, Manchester, Sheffield and beyond.
Leeds, is one of the fastest growing cities outside of London – Leeds has enticed around 1 in 10 people who leave London making it a very hot buy-to-let investment area.
As far as regeneration goes, Leeds has several major projects in the pipeline, notably a £3 million revamp of Leeds City Station, and a £270 million facelift to the ‘west end’ of the city – the 2.8-acre ‘Lisbon Square’ site, which will almost double the size of the current city centre and boost the city’s economy in the process.
With Leeds also only 20% above the 2007 peak, compared to Manchester and Nottingham, it might suggest that Leeds still has a way to go in terms of growth before we see the next property market crash and that over the next explosive growth in the property market you might be able to make some great returns in and around the city.
Is Sheffield a good place for buy to let?
Lastly, I’ve included (with a little bit of bias), my hometown area in South Yorkshire… Sheffield. I genuinely believe Sheffield is a great city with a lot of potential, it has been a lot slower over the years with modest growth and usually in the middle of the property price tables over time and only 17% above the 2007 peak meaning it’s still got a lot of room to grow.
I think Sheffield is a bit of a hidden gem, missed by many property investors who are looking more towards Manchester and Nottingham where more news headlines are talking about the growth, I think Sheffield will have modest growth over the next 1 to 3 years but beyond that it really could start to ride a bit of a wave and a boom as more people clock onto the area and begin investing and pumping more money into it.
Property prices are still very affordable and you can get a great property for a great price really close to the main area of the city which is great, the transport links are also very strong with trains direct to London, Manchester, Birmingham and Liverpool to get you around the country.
Having already completed The Heart of the City masterplan, which saw the regeneration of the Peace Gardens, the Winter Garden and St Paul’s Tower and the introduction of new restaurants and grade A office space, this Northern city is now onto a £470 million Heart of the City II masterplan.
With planning proposals for 1.5 million sq ft of redevelopment including leisure facilities, quality urban living, public spaces and premium retail units, it’s expected this scheme will deliver between 5,000-7,000 new local jobs – a bona fide tick in the box of any private landlord looking for an area with increasing tenant demand.
There are lots of new employers moving into the city, and recently HSBC opened a brand new digital and cyber security office there along with employers like McLaren and Rolls Royce making their home in the brand new advance manufacturing park.
Conclusion - Best Buy To Let Areas
So – to wrap this all up, this guide doesn’t mean that these areas are guaranteed to do amazing and that they’re the only places to invest in the UK – realistically you can invest in any area as long as you do your homework, buy at the right price and make sure you run the right numbers to ensure you’re not buying too high.
