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Best UK Cities for Property Investors

For those looking to invest their money in property, we take a look at some of the best UK cities for property investors in 2022. 

It’s no secret that house prices have been on the rise all over the UK. From February 2021 – February 2022, the average house price increased by almost 11% to reach £277,000 – £27,000 higher than the previous year. While there’s a general rise in house prices, regional variations in property price growth mean that some cities offer buy-to-let investors more lucrative opportunities than others.

Should I invest in Buy-to-Let in 2022? 

Investing in a buy-to-let property has long been an attractive option for many investors. Having the ability to cover the cost of a mortgage while also making profit through rental property income means an investment property is regarded as a great way to make money while putting a roof over a tenant’s head. 

In the last decade the number of people renting in the UK has increased by 1.7 million, resulting in a strong and robust private rental sector. With house prices at record rates, more people are renting for longer in order to save up for a deposit for their own home, meaning the market is thriving. 

While the record property prices have seen some landlords decide to sell up and cash in their investment, in 2022 investing in a buy-to-let property can still deliver plenty of gains as long as you conduct enough research into local supply and demand before making any decisions to be sure that your property delivers income and capital growth. 

If you know your investment goals, choose a good property to let and understand the investment return timeline, there are plenty of opportunities in buy-to-let investment in 2022.

Is Now a Good Time to Buy a House? 

When it comes to buying a house in the UK, no investment is without risk, but generally speaking, and taking a long term view, buy-to-let property is seen as a relatively stable investment where there is the chance to make a good income. While rental income is important to cover outgoing costs like the mortgage or repairs, capital growth is a factor that makes property a lucrative investment avenue. 

In 2020 and 2021 house prices defied expectations and in 2022 the market is still going strong. While some predict that house prices are due to take a drop, that hasn’t happened almost six months into the year so far. Some investors have decided to take their time and see if UK property prices will slow down in the second half of 2022, but with prices and interest rates continuing to rise, other investors are getting in while they can. Overall it’s a limited supply and strong demand that continue to prop up house prices across the country. 

What Tax do you Pay as a Landlord? 

If you have decided that purchasing a buy-to-let property in 2022 is the right thing to do, it’s a good idea to first be aware of tax you need to pay as a landlord. Compared to previous years, buy-to-let properties do come with more tax. Anyone purchasing a second property is subject to an additional 3% stamp duty tax. Landlords also need to pay tax on their net rental income. 

Where is the Best Place to be a Landlord? 

The best places in the UK to be a landlord are those that deliver high yields and offer strong capital growth projections. Manchester is one of the most popular cities for landlords with average yields of 6% and strong capital growth prices with property values rising 4% per year meaning that landlords have seen some lucrative ruses in rents. 

What’s more, demand is continuing to grow as 27% of the city’s population currently rents and another 100,000 people are expected to move into the city centre by 2025. Property investment in Manchester is thriving and is expected to do so for some time. 

Where is the Highest Rental Demand in the UK? 

As well as property prices on the increase, rents have been steadily on the rise too. In 2021, rents across Britain grew by almost 8% with most of this increase outside of the capital. 

Nottingham has seen yields reach 11% in some areas and student cities like Manchester and Leeds have consistently high rental demand. Demand from young professionals continues to grow as these cities become an attractive alternative to London while offering strong job opportunities. 

What is Considered a Good Return on Investment in Real Estate? 

Working out what makes a good return on investment in property will depend on a number of factors, like your mortgage rate, and ROI can vary widely depending on your investment. The most important thing is that your property is making money. 

Generally in the UK market, a good capital growth rate is a property that gives a return of around 4%. When it comes to rental yields, the higher the yield the better, but between 5 – 8 % is considered a good return on investment. 

 

What are the Best UK Cities for Property Investors in 2022? 

Which are the UK’s cities where an investor might look to spend their money in 2022? Here are five cities that continue to perform well for investors. 

1. Bristol 

Bristol’s property market is officially soaring. Figures showed a 2.1% house price rise in January 2022 alone, signalling strong demand. The main reason for Bristol’s hot property market is limited stock which is keeping prices high. This year’s boost is part of a longer-term trend which has seen prices for property in the area around Bristol achieve around 8% annual growth. 

Today, first-time buyers are spending £22,000 more than they were a year ago. The average price of a property in Bristol is currently £333,058. 

2. Leeds 

House prices in Leeds rapidly increased during the pandemic due to an undersupply of houses and desire for more space and rural living. Over the last year, the average price of a property in Leeds was £236,713 and properties sold for an extra 5% on the previous year. 

Properties to buy in Temple Newshaw saw prices increase at a faster rate than anywhere else in the Leeds area, with the average home selling for around £225,000 up 22% based on the previous year. 

Leeds is one of the best UK cities for property investing in 2022 because it remains relatively affordable, properties in Leeds are still 27.67% cheaper than the UK average. At the same time, a growing population and increasing rental demand means that investors can get solid returns by investing in Leeds. If you’re thinking of buying an investment property, Leeds can be a great place to do so. 

3. Birmingham 

One of the fastest-growing cities in the UK, Birmingham has regularly been dubbed one of the best UK cities for property investors, a fact that remains in 2022. Rents across this year are expected to rise by over 12% and last year landlords in the BD1 area saw average rents increase by close to 7% due to a drop in supply. 

The Commonwealth Games will place an international spotlight on Birmingham this year and is expected to further boost the city’s appeal. Investment in the Games is putting many improvements in the city in motion, attracting a growing population and growing rental market – the Games will bring £778m investment into the city and region. 

Birmingham continues to be a key city for students, young professionals and families and thanks to a broad appeal the housing and rental market is expected to remain healthy. In the next four years rents are expected to rise by over 10%. The average rent is currently £1,188 and average yields of close to 7%. Birmingham’s average property price is £206,000, meaning there are plenty of opportunities to get your hands on a high yielding property. 

4. Manchester 

Manchester offers a thriving rental market and affordable property market and soaring rental demand, making it one of the best UK cities for property investors. Properties in Manchester sold for an average price of £249,576 over the last year, which was an increase of 6% over the previous year. 

With house prices shooting up all across the country, Manchester property prices saw an increase of 19% in some areas. Rents in the city centre have the highest demand with young professionals keen to find accommodation close to their work. Average rent in the city centre is close to £1,100 and average yields are around 7%. 

5. Liverpool 

Another city regularly hitting the best city in UK for property investors in 2022 lists is Liverpool. Average property prices in Liverpool are currently £192,000, an increase of 6% over the last 12 months. 

Liverpool postcodes have some of the highest performing rental yields in the country. The L1 postcode is one of the most sought-after places to live and has delivered yields of 8.1% annually, while L7 tops the list with an average yield of around 10%. Property price growth through to 2025 is expected to be similar to Manchester, increasing around 28%. While capital growth prospects are behind those of Manchester and Birmingham, they are still expected to reach around 16% over the next 5 years, making Liverpool of the best cities for property investors. 

House Price Growth – the Index

Average price % change yoy Mar-22 % change yoy Mar-22
UK £249,700 8 .3% 4.4%
20 city index £285,200 6 .3% 3.9 %
Liverpool £147,300 10.1% 7.7%
Nottingham £188,600 9.8% 5.9%
Manchester £207,600 9.5% 6.8%
Bournemouth £331,000 9.4% 4.1%
Leicester £214,900 9.1% 5.1%
Leeds £198,500 8.9% 5.9%
Portsmouth £273,800 8.8% 3.7%
Sheffield £163,000 8.6% 6.3%
Bristol £322,100 8.5% 4.5%
Cardiff £243,800 8.5% 4.5%
Belfast £160,200 8.2% 6.1%
Birmingham £194,800 8.2% 4.7%
Southampton £251,400 7.2% 3.2%
Oxford £441,000 6.3% 2.4%
Glasgow £138,000 6.1% 4.6%
Cambridge £452,400 5.7% 2.9%
Newcastle £143,500 5.4% 4.8%
Edinburgh £255,300 4.4% 3.4%
London £513,700 3.4% 2.2%
Aberdeen £140,300 -1.0% -2.2%


Source: Zoopla House Price Index, powered by Hometrack

 

When it comes to the best cities for property investors in 2022, a few key cities including Leeds, Manchester, Liverpool, Bristol, and Birmingham remain at the top of the list. While the property market in the UK is expected by many to cool in the coming year, strong demand in these cities and limited housing stock means that investing in these areas can deliver great yields and strong capital growth for investors. 

To find out more about where to invest in property in 2022 or if you’re wondering how to invest in UK property, get in touch with our expert team.

We have a range of investment options available in Northern England.