London has long been considered the place to be for any kind of investment. England’s capital city sees flocks of tourists, overseas workers, and investors heading to London year after year to take advantage of the sights, attractions and opportunities available. Those considering their first investment in the UK might automatically look towards London buy to let, but is this city really the property investment hotspot that some of us might think it is?
Buy to Let Property London
The Office for National Statistics reports that the average London home cost £115,000 twenty years ago, growing to an average of £351,000 in 2008 and standing at around £671,412 as of 2018. Capital appreciation had long been the main force driving people to invest in London property, with the potential for London properties to grow in value over recent years. If an investor had purchased a London property for £200,000 in 2007, near Kings Cross station, for example, this would now be worth over £300,000.
However, this growth in London property prices comes with a decline in rental prices. In February 2017, the average rental property in London was let for around £1,280, presenting a one per cent decrease year on year. High property prices and lower rent means one thing for investors — some disappointing average rental yields. Those investing in London property in 2018 can expect yields at an average of 3.7 per cent, which is a lot lower than some other areas of the UK.
Whilst property investment in London isn’t looking particularly promising, things are starting to look up in the future. Several areas in London are expected to experience property growth by 2020. Whitechapel, Canary Wharf, Earls Court, Old Oak Park and Croydon are all predicted to make their mark on the property map. This is due to several regeneration projects set in place for the city, with plans for improved transport links and the creation of thousands of new homes and jobs. London has been predicted to reach rental yields as high as six per cent by 2020.
Property Investment Up North Vs London
But what about those who don’t wish to wait until 2020 to invest in UK property? The North of England has gained a positive reputation throughout the property market as of late. Cities like Liverpool and Manchester have made a name for themselves as property investment hotspots, and rightly so. Liverpool is a city in which property investment is growing in popularity, largely due to the fact that the city offers some of the best rental yield rates in the whole of the UK. The average rental yield in Liverpool is around 5.05 per cent, with an estimated rental growth of 17.6 per cent throughout the next five years. At RW Invest, our investment opportunities in the North offer yields that range between 6 to 9 per cent in some of the most prime locations in Manchester and Liverpool.
Compared to property investment in London, buy to let opportunities in Liverpool are a lot more affordable, with an average house price of £130,677 and a noticeable difference in the cost of living in Liverpool vs London. This makes property investment more accessible to those with a lower income, whilst increasingly high rental costs in the city are maintaining the impressive rental yields. The success of Liverpool on the property front is most likely fed by the growing demand for high-quality property in the city. The London property market is currently over-saturated, with around 50,728 properties available for rent — a recipe for disaster when it comes to a 1.12 per cent decrease in rental price growth. The city centre population of Liverpool is now the fastest growing in the UK, with a 181 per cent increase between 2002 and 2015 thanks to the number of students and young professionals heading to the city each year.
To make the divide between North and South a little clearer when it comes to property, all you need to do is consider what type of property you could buy in London for the same price up North. For £500,000 in London, you can purchase a standard two-bedroom apartment, whilst for the same price up in Liverpool you could buy a six-bedroom house with a large garden and driveway. The prices of the properties at RW Invest are proof enough that Liverpool and Manchester offer some of the best deals, with our Hamilton Hub student property boasting the lowest price in the UK from just £45,450.
The student population of Liverpool and Manchester is a big factor that contributes to the Northern property market’s success. A combined total of around 155,000 students populate Liverpool and Manchester, all of whom are looking for quality accommodation. Not only this, but the wide range of business opportunities in these cities is bringing in attention from more and more young professionals. London has always been the go-to city for ambitious young people, but figures show that in recent years more people are moving to Northern cities like Manchester to take advantage of affordable prices and exciting business potential. New developments such as MediaCityUK in Salford, home to major business headquarters like the BBC and ITV, are attracting people from around the country.
This surge of people leaving the capital to move up North is likely to have a big effect on the London property market and change buy to let opportunities available for property investors. Since a large amount of the people leaving London are professionals, the demand for quality property with higher than average rental yields will diminish, replaced by people with lower incomes.
Some of the London property hotspots of 2018 are areas with a lot of potential for capital growth. Upcoming London areas include Shepherds Bush and Peckham Rye, both of which are introducing new business opportunities and plenty of local attractions, restaurants, and bars for residents to enjoy. Property development companies in London are starting to build new homes in these areas, but with an average price of £518,773 for an apartment, why invest more money in London when you could invest less for the same quality and better potential up North?
Overseas investment has always been popular in London, with the proportion of international investors buying London property at an all-time high. London property news has presented findings that show that international investment across London had grown by 30 per cent year on year. Overseas investors may be tempted by investment opportunities in London due to presumptions that since London is England’s capital, it’s the most reliable city to get involved with.
International investment isn’t just prevalent in the capital, with Liverpool and Manchester also considered prime cities for foreign investors to pursue. Northern cities have gained the attention of foreign investors who are vigilant about investing in the cities with the best returns, and with the buzz surrounding the Northern Powerhouse as of late, Liverpool and Manchester are viewed as key opportunities.
Chinese investors make up the largest number of overseas investors in the UK property market, but during the first half of 2018, Chinese investment in London has reached its lowest level in two and a half years. Latest property price news shows that buy to let property in London is becoming less attractive to investors from China and Hong Kong, who are put off by the high prices and disappointing potential for rental returns. These types of foreign investors are being drawn in by the affordability and promising prospects offered by Liverpool and Manchester, particularly with the active student communities of these cities. The purpose-built student accommodation market is an appealing sector for international investors, with five of 2016’s biggest student property deals being made with foreign investors.
All in all, is investment property in London a good route to take? While several property investment companies in London may claim that the city offers some worthwhile opportunities, the numbers show that investments up North present much more potential . Those adamant in investing in London property should do so wisely, researching the best places to buy in London and being prepared to wait many years to see desirable returns. With Northern Powerhouse cities Liverpool and Manchester offering everything an investor needs for a solid investment, there’s no reason why first-time or experienced investors into the UK property market shouldn’t explore the wide range of opportunities available in these cities.
Here at RW Invest, we offer a choice of fantastic new build properties in Liverpool and Manchester, all of which have competitive rental yields, prices, and capital growth potential. If you’re a property investor interested in discussing our available property for sale, don’t hesitate to get in touch and our team of property professionals will happily advise you on the best opportunity for you.