UK Property Investment Hotspots

Best Areas To Invest UK Property

Best Areas To Invest In UK Property: Complete 2023 Guide.

Where Are The Best Areas To Invest?

There’s likely never been a better time to invest in UK property.

With record-breaking price growth and rental yields soaring across UK cities, you may feel like 2023 is the perfect time to make an investment.

But with so many cities and towns to choose from, it can be overwhelming knowing what to look for.

Don’t worry, though, as we’ve done the hard work for you and have used the latest Land Registry figures to work out the best places to invest in property UK 2023.

In this article, you’ll find:

  • An overview of the UK property market in 2023
  • The top 10 best locations for capital growth
  • The best rental yields in UK 2023
  • The most affordable buy to let hotspots in 2023
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UK Property Market Overview: Massive Growth for Property Investment UK 2023

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Buyer Demand Has Doubled
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UK Property Prices Reach Record High of £254,822
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Rental Index Report All Time High Rental Demand
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UK property prices increased by 10%

Despite Covid-19 and Brexit rocking the UK economy, the private rented sector and UK housing market experienced one of its best ever years.

According to data from Nationwide, the average UK property price soared to a record-high of £254,822 in December 2021.

Not only is this £24,000 higher than in 2020, a 10% growth, but this was the highest growth in 15 years.

Property prices across the UK increased consistently during 2021, a symptom of a new house-buying frenzy kickstarted by lifestyle changes caused by lockdown and the stamp duty tax holiday.

Buyer demand was so high in 2021, in fact, that Rightmove found it was twice as high as pre-pandemic levels, with UK house sales from first-time buyers reaching the highest level in 19 years.

The property sector also saw huge growth in the rental market, with the average rental price increasing by 8.3% between December 2020 and December 2021, reaching £1,060, just £1 short of the all-time record set in September 2021.

So, what does this all mean for property investors?

Simply put, there are some huge opportunities to make major returns in the UK if you know where to look – something we will discuss in the next three sections.

Which Areas Have the Best Capital Growth in the UK 2023?

City Current Average Property Price 12 Month Capital Growth Predicted Capital Growth 2022 Predicted Capital Growth 2026
Liverpool £171,221 17.90% 4.50% 18.80%
Middlesbrough £132,815 16.24% 4.50% 18.80%
Sheffield £194,325 10.98% 4.50% 18.80%
Manchester £211,773 8.46% 4.50% 18.80%
Leeds £216,820 8.48% 4.50% 18.80%
Sunderland £136,439 18.05% 4.00% 17.60%
Edinburgh £319,160 13.46% 4.00% 15.90%
Leicester £210,890 12.17% 4.00% 15.90%
Glasgow £164,483 11.92% 4.00% 15.90%
Cardiff £242,982 11.86% 4.00% 18.20%

By using the latest Land Registry data and regional predictions from Savills, we have calculated the UK’s top 10 areas for capital growth, factoring in both 12-month growth and future growth potential.

Firmly at the top is Liverpool, which has seen property prices rise by over 17.90% in 2021.

Factoring in a predicted growth rate of 4.5% in 2023, and a long-term growth forecast of 18.8% by 2026 in the North West, and it’s clear that Liverpool is one of the best areas to invest in property for those targeting capital growth.

Closely following Liverpool in second place is Middlesbrough. Property prices in this North Yorkshire town have increased by a substantial 16.24% between October 2020 and October 2021 (the latest available data at the time of writing in 2023).

Like the North West, the Yorkshire region has the joint-highest house price growth prediction in the UK, with Middlesbrough set to see identical growth to Liverpool in 2023 and beyond.

In third is Sheffield, with prices growing by 10.98% over the last 12 months.

Rounding out the rest of the top five is Manchester and Leeds, which boast almost identical 12 month property price growth rates of 8.46% and 8.48% respectively.

The Downside of Percentage Metrics

While this list is a good starting point to decide where to invest, percentages don’t tell the full story.

You may be surprised to see no cities or towns from the South East, South West, or London region on this list, with these regions having the lowest predicted future growth rates in the UK, ranging from a low of 5.6% in London, to 13.1% in the South West.

However, while this seems pretty damning, percentages can be somewhat misleading, as property prices are usually higher in southern regions, which can impact the percentage increase of an investment property.

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For example, the average property in London increased by £30,073, from £486,212 to £516,285 – a percentage increase of just 6.19%.

Compare this to Liverpool. Although property prices increased by a staggering percentage figure of nearly 18% in the Merseyside city, the actual capital gains from October 2020 to October 2021 was £25,999 – £4,074 less than London.

This doesn’t mean that London is a better investment than Liverpool, as property prices in the city are over £345,000 more expensive, but it does effectively show that a higher percentage doesn’t necessarily mean more cash in your pocket, even if it does highlight a good buy to let investment.

What Is Capital Growth And Why Is It Important?

Capital growth is the increase in a property’s value over time and is one of the biggest draws of real estate as an asset.

Capital growth, otherwise known as capital appreciation or capital gains, is a key metric for those planning for retirement, allowing property investors to make potentially hundreds of thousands of pounds from the sale of a property.

It’s important to note, though, that the figure you sell your property for won’t be the one you pocket, with all profit made subject to capital gains tax in the UK, which can range from 18% to 28% depending on your income tax band.

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What Are The Best Rental Yields In The UK?

City Current Average Property Price Average Annual Rent Average Rental Yield
Southampton £222,134 £19,524 8.79%
Manchester £211,773 £18,528 8.75%
Leeds £216,820 £18,348 8.46%
Newcastle Upon Tyne £178,220 £14,988 8.41%
London £516,285 £43,380 8.40%
Coventry £207,023 £15,480 7.48%
Glasgow £164,483 £12,288 7.47%
Stoke-on-Trent £130,094 £9,552 7.34%
Brighton £407,587 £29,172 7.16%
Liverpool £171,221 £12,060 7.04%

While capital growth is undoubtedly a vital metric, another aspect of property investment all UK investors should consider is rental yield.

The UK property market is well-known on the global scale for its rental yields, with the average UK rental yield (4.74%) over double the level seen in locations like Shanghai.

With that being said, there are often significant variations in UK rental yields depending on what city you invest in, with rental yields heavily impacted by house prices.

Currently, the city offering the highest rental yields UK is Southampton, which generates gross returns of 8.79%, thanks to an average yearly rental rate of £19,524.

The second highest rental yields in the UK is Manchester, which closely falls behind Southampton with rental returns of 8.75%.

Leeds, Newcastle, and London fill out the rest of the top five, with average rental yields of 8.46%, 8.41%, and 8.40% respectively.

London is likely the biggest surprise on this list as it has the highest average property price out of any major UK city, valued by the Land Registry at £516,285. Despite this, yields are still high thanks to a huge average rents of over £43,000 annually.

Got Rental Yield Questions?
Well, We’ve Got answers

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Rental yields are a percentage figure that shows the return on investment property investors will earn through rental income.

You can calculate both gross and NET rental yields, with NET being a far more accurate measurement as it takes into account your expenses.

To work out NET yields, though, you will need to know your monthly/yearly expenses, which can be difficult when scouting a property.

Examples of expenses can include mortgage payments, ground rent, and maintenance costs.

You can calculate rental yield by dividing your yearly rental income by the purchase price of a property and multiplying by 100 for a percentage figure.

For example, a home that costs £100,000 and generates rent of £1,000 per month would have a rental yield of 12%.

This doesn’t factor in expenses, though, and you’ll need to factor this into the calculation to get the most accurate rental yield figure.

You may not have to work the NET yield yourself out, however, with some estate agents or investment companies known to advertise the NET rental yields before you buy.

Generally, a good gross rental yield will be 7% or higher. Any less than this, and you may struggle to cover all of your expenses.

Whether you should focus on capital growth or rental yield will depend on your investment goals.

For some property investors, increasing your spendable cash is the main target, which means rental yields will likely be the biggest attraction as it directly influences how much money you get per month.

Alternatively, those completely focused on retirement will be more interested in long-term capital growth.

However, let’s say you’re more interested in house flipping rather than becoming a landlord, and are wondering about the best places to flip houses 2022 UK. If that’s the case, rental yields and long-term capital growth are pointless as you won’t rent out the home nor keep it for a long time.

For house flippers, you’ll be more interested in finding locations with cheaper properties and a busy property market, like Liverpool, Glasgow, and Stoke.

Overall, if you’re a prospective landlord, the best bet may be to focus on all three aspects, ideally choosing a property that is affordable, offers strong rental yields, and has good capital growth potential.

Remember, though, that focusing just on capital growth can be incredibly risky, as there is simply no way to guarantee that a properties price increases significantly in the long-term.

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What Are the Most Affordable UK Cities in 2023?

City Current Average Property Price
Stoke-on-Trent £130,094
Middlesbrough £132,815
Sunderland £136,439
Glasgow £164,484
Liverpool £171,221
Newcastle Upon Tyne £178,220
Sheffield £194,325
Conventry £207,023
Birmingham £209,245
Leicester £210,890

While capital growth and rental yields are two excellent measurements to consider before buying a property, it would be pretty pointless if you were unable to afford the property in the first place.

This is why this section will cover the top 10 most affordable locations out of the top 20 most populated UK cities/towns.

Remember that affordability is just one aspect, and you should also consider the potential rental yields and capital growth on offer.

Currently, the most affordable UK city in 2023 is Stoke-on-Trent with a current average property price of just £130,094 – over half the price of the average UK property price.

The city was also ranked eighth in the UK for rental yields, offering rental returns of 7.34%.

Following closely behind in second place was Middlesbrough, with property prices valued at £132,815 on average. The town has already been mentioned on this list, after finishing second in the UK for capital growth in 2023.

The rest of the top five most affordable locations include Sunderland, Glasgow, and Liverpool, with an average house price of £136,439, £164,483, and £171,221, respectively.

Where Should You Invest in 2023?

Now that we’ve covered the most affordable locations in the UK, as well as the best cities for both capital growth and rental yields, are there any options that stick out? Where exactly should you invest in 2023 and what is the best place to invest in property in 2023?

Looking at the data, there are two stand-out locations in the UK for buy to let landlords that could be called the best places to invest and the most profitable city; Liverpool and Glasgow.

Both these cities are the only ones that appear in all three of our criteria, with Liverpool finishing first for capital growth, fifth for affordability and tenth for rental yields.

Meanwhile, Glasgow finished fourth for affordability, seventh for rental yields, and ninth for capital growth.

But while these cities offer incredible potential, there is no guarantee that you will make a successful investment here. The reality is that there are tonnes of factors that influence whether an investment is successful, and you can make a great investment in any of the cities mentioned on this list.

When evaluating the potential of a property, you’ll need to keep in mind the following 10 criteria:

  1. Consistent tenant demand / strong rental demand.
  2. Growing population of young professionals.
  3. Nearby transport links.
  4. Featuring important facilities like high speed WIFI and nearby green spaces.
  5. Major UK universities located nearby if you’re making a student property investment.
  6. Employment growth potential.
  7. Affordable property values.
  8. Strong rental income.
  9. Future levels of urban regeneration.
  10. Future capital growth potential.

All these criteria are vital to consider, with a property featuring all 10 of these criteria increasing the likelihood of success.

So, while this list is generally a good place to start, you shouldn’t rest all your investment decisions on rankings, with different properties offering completely different investment potential.

Up and Coming Areas in UK 2023

While many locations on this list are already excellent choices for investing in UK property, there are several up and coming locations all investors should keep an eye on in 2023 and beyond.

Through upcoming regeneration and rising population sizes, these cities or towns could net you a huge return in the coming years.

The top four best up and coming areas in UK 2023 are:

  • Slough
  • Wigan
  • Luton
  • Derby

This is because of huge regeneration in the area, with the likes of HS2 and Cross-rail helping to create massive tenant demand in the areas.

Want To Invest In Property?

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How to Invest in Buy to Let Property in 2023?

So, now that we’ve looked at the best places to invest in UK property and some of the most exciting up and coming areas in 2023, how should you invest?

Here are three tips to make sure you get the most out of your property investment.

  • Diversification is Key – Be sure to buy properties in different locations so you aren’t impacted by a poor performing rental market.
  • Don’t Always Buy Property Near You – While it may be tempting to buy property as close to your home as possible, you could be limiting your investment potential by investing in an area with poor tenant demand. Instead, use a property management company to handle all landlord duties on your behalf.

Consider Other Property Types – Instead of just focusing on traditional residential homes, you could consider buying apartments, purpose-built student accommodation, or commercial property to diversify your portfolio.

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