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Savvy Investors Look to City Apartments in UK Housing Market

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    Confidence in City Centre Apartments Increases as More People Go to Work in the City

    Following the COVID-19 pandemic, people are finally returning to office-based work, which means buy-to-let investors are shifting their focus to accommodate more people considering city-centre living.

    A recent study from Shawbrook looked into property investor confidence in urban flats, highlighting whether these investments would be lucrative for a buy-to-let investment strategy.

    Let’s see what the research means for buy-to-let property investment in the UK.

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      How Many Landlords Are Optimistic About the Profitability of City Centre Apartments?

      Amidst the resurgence of office-based work, research conducted by Shawbrook Bank reveals a focus among landlords who are intensifying their investments in urban flats. This follows a recent trend that has seen potential buyers move towards city living.

      28% of landlords in the UK acknowledged that, in the past 12 months, flats in cities have proven to be one of the most lucrative investments. Looking ahead, 26% of respondents believe that urban flats will continue to be a sound investment choice over the next 12 months.

      The data also reflects a broader trend regarding office-based working, with 43% of employees returning to the office. In response, landlords are identifying the investment potential of city centre properties.

      The research underscores a preference for city centre accommodation among landlords in specific areas. In London, 30% of landlords recognise city flats as the optimal investment. This should come as no surprise – city jobs in London have grown by 13% since 2019, with 615,000 workers in the capital.

      Similarly, in Scotland and Wales, this number of landlords looking at city centre apartments escalates to an impressive 39% and 28%, respectively.

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      What Did Shawbrook Bank Say About Their City Centre Apartment Data?

      Managing director of real estate at Shawbrook Bank, Emma Cox, said:

      “The end of ‘the flight to the countryside’ and resurgence of city living post-pandemic has not gone over landlords’ heads as investment in urban properties has gained strong momentum.

      “Whilst the property market still remains turbulent, with high interest rates and inflation impacting buyers, landlords are adapting their strategies to diversify and stay on par with changing trends.

      “Now may also be the right time for professional landlords to partner with a specialist lender to maximise opportunities available and future-proof businesses against any further market challenges.”

      Read More: For more property investment insights regarding specific buy-to-let city locations, consider our guides on Islington property investment and Leicester property investment.

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        Which Cities Could Offer High Rental Yields for Urban Flats and Apartments?

        While the likes of London may attract investors due to the strong economy and allure of being the capital city, many buy-to-let investors tend to look to other areas of the UK. This is due to the huge average property price and soaring rental prices deterring potential tenants. According to the HM Land Registry UK House Price Index, the average property price in the City of London is £901,625 (as of August 2023). While these figures may be skewed by the ultra-prime property prices in Chelsea and Kensington, they are still significantly higher than the average UK property price of £290,353.

        Let’s compare that to more northern cities, such as Liverpool.

        While Liverpool may not have the same economic level as the English capital, it still boasts a considerable job market at its own rate. As such, graduate retention levels are high, with more young professionals choosing Liverpool for work.

        Not only are young professionals staying in Liverpool for job opportunities, but they are also benefitting from competitive rental prices. The average rent in Liverpool is £1,082 pcm, according to the Liverpool Market Rent Summary. In comparison, the average rent in the London region is £2,127 pcm, according to the HomeLet Rental Index.

        Also, the Liverpool property prices are considerably cheaper than in London. Per HM Land Registry, the average property price in Liverpool is £177,076. This makes Liverpool properties around 134% more affordable than London.

        According to Zoopla, the average gross rental yield in Liverpool is 7.43%, while the London region has the lowest average in the country at 4.92%.

        In addition, the North West is predicted to enjoy 9.2% returns in the buy-to-let market over 2024 (according to Savills), making it potentially one of the most lucrative places to buy property to rent out in the UK over the next 12 months.

        So, if you’re looking at buying an investment property as part of your property investment strategy, it could prove to be a more savvy investment thanks to good-value prices and significant tenant demand.

        Discover More: Feel free to browse some of our other helpful guides and insights, whether you want to learn how to generate a passive income or about the highest-yielding UK regions.

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        Dale Barham

        Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.