Top 10 Worst & Best Property Investment Areas, UK
We take a look at some of the worst but also the best property investment areas UK has to offer in 2022. Further, we’ll touch on how to make sure you invest in a property that offers the best rental yields and potential for capital growth.
Bricks and mortar remains as reliable an investment as ever, but securing a rental income generator or property that will deliver strong capital gains depends on a number of factors. One of which is deciding on an area which has the most potential, for example.
While many people decide on a property to buy based on how much they like the apartment or house, location is still one of the most important elements in the decision to buy a property. However, you can always make upgrades to a house – whether that be the layout or decor. On the other hand, you can’t change a property’s location.
As a buyer, essentially you’re investing in a plot of land. Therefore, those who choose the best locales will be owners of the most valuable property and one that depreciates at a much slower rate.
Read on to find out the best property investment areas in the UK, but also areas you should definitely avoid in 2022.
Is Property a Good Investment in the UK in 2022?
Before looking at the best property investment areas in the UK, let’s take a quick look at the UK housing market as a whole. At the start of 2022, average house prices in the UK jumped to a record high of £276,759. According to Rightmove, looking at the same time a year ago in January 2021, this is an increase of 7.6%.
The buoyancy of the UK housing market is due to a few factors:
- Pent up demand due to the Covid-19 lockdown and pause on the market
- A limited supply of houses compared with demand
- Lifestyle changes driven by the pandemic in which people search for more space or escape to the country.
Property is viewed as one of the best ways to invest your money, especially when compared to other investment avenues that tend to be more risky, for example stocks and bonds. But would investing in a property in 2022 be a good investment?
For the remaining half of 2022, predictions expect house prices to slow down and overall remain flat in 2022. Savills predicts that house prices will grow 11-12% between 2022 and 2025 – the estate agent’s predictions were based on the Bank of England increasing interest rates to no more than 0.5% in 2025.
Taking a long-term view, house prices in the UK tend to rise, even if there are dips along the way. Most important to note is that price slumps and rebounds vary by location, with some areas rebounding faster than others. Something to consider is that the North of England is tipped for greater property growth than the south in the coming years.
The Northeast of England saw record growth of 13.3% in August 2021, while London saw the slowest growth of 5.3%. By 2026, Yorkshire is expected to be the UK’s best performing region, predicted to rise 18.8% between 2022 and 2026.
When considering buying property in 2022, it’s important to thoroughly research prices in the area you are considering to see how they have performed in recent years and how they are likely to do so in the future.
Should I Invest in Buy-to-Let in 2022?
If you’re looking for the best property investment areas in the UK for buying a buy-to-let property, you’ll not only have the opportunity to generate income from monthly rent but capital gains when you come to sell the property. The UK market has a steady stream of tenants looking for rental accommodation.
In the UK in 2021 there were 4.4 million households privately renting. As UK property prices jump to record levels, more people are renting for longer in order to save up for the 25% deposit most banks require for a mortgage.
As mentioned before, a determining factor in whether buy-to-let property investment is a good idea is location. The UK’s northern cities are undergoing regeneration, and incoming investment makes them an increasingly appealing place to live. Some popular northern cities are facing a housing shortfall as a growing population enticed by new opportunities and cheaper living costs in these cities.
Is Now a Good Time to Get a Mortgage?
When you come to invest in a property, it’s highly likely that you’ll need a mortgage. Across the UK we’re seeing greater pressure on household budgets as a result of the increase in the cost of living and a possible increase in interest rates to subdue rising inflation. In other words, when interest rates rise, mortgages are more expensive which tends to lead to a decrease in demand for property and result in a cooling housing market.
Despite this, interest rates currently remain low based on historic standards. Attractive mortgage deals are still available, although perhaps not as many as there were a few months ago. Those with the largest deposits are most likely to get the best mortgage rates.
It’s always worth talking to a mortgage advisor who will be able to give you access to a range of mortgage deals. You might want to consider a fixed-rate mortgage, while interest rates are relatively low.
How Much Profit do Landlords Make in the UK?
In the UK, landlords earn on average £15,000 per year. This figure is before taxes and other decisions. Most landlords in the UK state that rental income accounts for around 40% of their gross income. Around 26% of landlords report a higher gross income of between £20,000 and £49,999 and 13% of landlords earn £50,000 or more from rental income.
What is a Good Yield for Buy-to-Let Property?
Along with capital gains prospects, rental yield is one of the most important considerations a landlord will have before investing in a property. In other words, the higher the yield the better. For instance, a yield of 8% or more would give a landlord a contingency budget should costs increase with little warning. Likewise, anything above 5% is considered a good yield, and 7% or more is ideal.
It’s worth noting that certain types of property have the potential to deliver higher yields than others. For example, some student properties in the right student cities can generate yields of up to 20% higher than the average property. You can read more about what makes a good yield in this article or take a look at our buy-to-let property guide giving an overview of everything you need to know when it comes to buying a buy-to-let property.
How can you Spot an up-and-Coming Property Area?
When considering the best property investment areas in the UK, it pays to be able to spot an up-and-coming area. With the location being one of the most important factors when it comes to buying a house, how can a potential investor know whether an area is on the rise?
While no one can say with 100% certainty, some of the factors that indicate an area may become desirable include:
- An influx of Young People
Young professionals in their 20s and 30s are often the trendsetters when it comes to the next best areas to live. As they move in, services and amenities tend to arrive around them. As a result, as an area becomes more desirable, property and rent prices tend to rise.
- An Influx of Businesses
As well as young people, an influx of businesses to an area can indicate its potential. In other words, the arrival of businesses means more people relocating for work, pushing up demand for property.
- Regeneration and Incoming Investment
Incoming investment, for example, infrastructure or regeneration projects, indicates that an area will become more desirable. Consequently, bring an influx of people that will make property prices rise.
Areas that have shops, schools, supermarkets and other sought-after amenities tend to indicate that an area is up and coming. Especially if they are within walking distance. These areas are likely to be popular with tenants and likewise, give property prices a boost.
- Transportation Links
Areas with good rail, road and air transport links tend to see an increase in property prices. To clarify, a few spots from transport hubs – whether train stations, underground stations or tram stops – is where property prices are likely to grow.
Find out more about how to spot up and coming property areas in this article.
Top 10 Best Areas for Buy to Let in 2022
Now let’s take a look at the best property investment areas in the UK in terms of profitability.
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Nottingham tops the list with the most profitable locations for investors with returns of 11% on average. The north of England is generally the best part of the country. That is to say that those looking for high yields will find some of the best investment areas in the UK right there. Likewise, student cities like Manchester and Leeds also feature in the top five. In other words, landlords can generate leads of sometimes 20% higher when investing in student property.
Top 10 Worst Areas for Buy to Let in 2022
In contrast, areas that are the worst to invest are those with the worst performing yields. These are currently mainly found in the south of England, where property prices are high. If you are looking for a property to buy in London, while yields may be lower, there are still plenty of prime opportunities in the capital. It doesn’t mean there aren’t opportunities in these areas, however, it does mean yields and capital gains may not be as great when compared to other areas.
When it comes to investing in property, it pays to look for locations that are on their ascendancy, becoming more popular thanks to an increasing population, growing job opportunities and high yields and plenty of opportunity for capital growth gains. To find out more about the best property investment areas in the UK, get in touch with our experts today.