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2018/19 Buy To Let Investment Guide By RW Invest

Buy to let property investment is one of the most attractive options for those looking for a way to gain long term financial security. When faced with the decision between unstable investment classes and a fluctuating stock market, the UK’s buy to let property market often comes out on top. When done right, property investments can generate a consistent income that allows investors more financial freedom, even into retirement.

House prices in the UK are growing at a rapid pace, with data compiled in April 2018 revealing an annual increase of 3.9%. Certain areas in the UK, such as Liverpool, are leading the way with this property growth, with a huge 7.5% increase by the end of 2018.

A lot of homeowners in the UK have benefitted massively from rising house prices and capital appreciation over the years. Ever since the introduction of the 1988 Housing Act’s Assured Shorthold Tenancies, the property market was opened up to buy to let investors, creating the potential for an accumulation of wealth outside of people’s day to day careers. For instance, research by the Telegraph revealed that investing in a run-down UK terraced house with two or three bedrooms in 2012 generated a market value of 180,000 by 2014 for one clever investor.

 House prices and rental costs are on the rise throughout the UK, with the North West region standing out above the rest. Cities like Liverpool and Manchester have attracted attention from savvy investors from around the globe due to the impressive rental yields and affordable property prices on offer.

The demand for rental properties is a factor that’s contributing to the success of the buy to let market. As of mid-2018, the demand for rental property reached new heights as the number of properties available for rent fell. With the majority of young people being much more likely to rent than buy, the demand for rental properties is sure to remain strong for many years to come. Experts predict that the build to rent sector is expected to be worth a huge £70 billion by 2022, making 2019 the perfect time to begin your buy to let journey.

Liverpool Waters £5bn Masterplan - Image With Text

The UK Property Market in 2018 and 2019

2018

The UK property market has faced a lot of uncertainty throughout the last year. The impending outcome of Brexit led many to question the stability of the UK property market in the face of potential economic turmoil. Discerning investors questioned whether it was still worth going forward with UK property investments during this period of instability led by Brexit negotiations. In actuality, the UK property market in 2018 was off to a good start, with enquiries from Chinese investors into Liverpool property having increased by 160% since January. By the third quarter of 2018, the UK economy had grown at it’s fastest pace in two years. Despite Brexit fears, overseas investment into the UK property market was strong as ever throughout 2018, with a third of all homes bought for £1 million or more in the being purchased by foreign investors.

Properties in a number of UK cities such as Manchester, Liverpool and Leeds have massively outperformed the rest of the country in 2018. Everything from rental price growth, rising house prices and capital appreciation have seen promising figures in 2018, led by factors such as strong tenant demand and a rise in city centre living. A number of UK regeneration projects were announced and completed during 2018. In May 2018, images were released of the £5 billion Liverpool Waters masterplan, whilst work begun in October on the city’s new £35 million Royal College Of Physicians. Over in Manchester, regeneration plans for the development of skyscrapers connecting Hulme to the city centre were given the go-ahead by council chiefs at the start of 2018.

In 2018, ARLA Property mark reported that the percentage of tenants having experienced an increase in rent reached its highest level at 40% in August, up from 31% in the previous month. There was a 2.65% increase in rental price growth in Liverpool alone, whereas Manchester saw a huge 5.76% growth.

2019

The UK buy to let market has some promising predictions in store for 2019. The North will continue to be the best place to look for property investments in 2019, with house prices predicted to rise further despite looming Brexit uncertainty. One key trend the 2019 property market is expected to see is the rise in the number of people renting. With a large number of people renting in the UK, many of whom are young people, this number is predicted to grow further in 2019. According to the Royal Institution of Chartered Surveyors, rents in the UK will have risen by 15% by 2023.

Although a large number of homes are planned for development in 2019, demand for rental properties is still predicted to outstrip supply. Buying property is consistently difficult for a lot of people, especially with rising house prices in the UK. A lot of people’s only option is to rent, and with city centre living becoming more popular than ever, there’s likely to be a high demand for quality city centre rental properties. This trend of young people leaving London to move up North is also expected to continue into 2019, boosting the demand for property from young professional tenants. With a number of regeneration projects continuing to be developed and finalised throughout the year, cities like Liverpool and Manchester will become even more appealing to those seeking an exciting and forward-thinking city to live and work in.

A number of laws are due to come into effect in 2019, including the finance bill which will mean that overseas investors must pay for disposals on UK property and property rich entities, taking effect from April onwards. Other laws such as the ban on tenant fees, a cap on tenants deposits, and the introduction of three-year tenancies are likely to go ahead in 2019, unless political events such as an unplanned General Election take place. 

Leaving London to Head North - MediaCityUK Image with Text Overlay

The North/South Divide

If there’s one thing that constantly comes up when discussing the UK property market, it’s the divide between the North and the South. Whilst London has long been the first point of call for many people looking to invest in property in the UK, the state of London’s property market over 2018 has led many to start questioning whether it’s worth choosing London for their next venture.

Highly priced properties, declining rental prices, and resultingly low rental yields are a few of the reasons many are steering clear of investing in London property. The North, in comparison, gives investors a much better chance of making a lucrative investment. Property hotspots like Manchester boast average rental yields of 5.55%, whilst London’s average is a mere 3.05%, leaving investors with little to no return on their investment.

The North Vs The South

The divide between these two areas is made obvious when you consider the average cost to buy a property in London compared to the North. According to Savills, for a two bedroom flat in London you can expect to pay just over £500,000, whereas, in Manchester, the same price can get you a six bedroom house with enclosed gardens and a large driveway and garage. The affordability of Liverpool property, paired with increasing rental costs of 2.65% in 2018, has generated some highly impressive rental yields in the city. Liverpool boasts an average rental yield of 5.05%, with certain yields in certain postcodes going as high as 11.79%.

In 2017 and 2018, record numbers of Londoners were reportedly leaving the capital and moving up North. A total of 10,200 people moved to Manchester from London in 2017, with around 30,000 of the total of London leavers in mid-2016 to 2017 in the age range of 25 to 34. With more people leaving the capital, many of whom are likely young professionals, the demand for high-quality city centre property is dwindling in London compared to the North. Liverpool and Manchester saw high rates of demand throughout 2018, and with the popularity of the North as a place to live, work and invest, this demand is likely to continue into 2019 and beyond.

Property Types

Whilst UK property investment was strong in 2018 as a whole, certain types of property have been more popular than others. Off-plan property, new builds, and purpose-built accommodation have all gained traction in recent years, and are expected to remain some of the most sought after property investments in 2019.

Purpose Built Student Accommodation - A Booming Market - Background Image: Hamilton Hub - Low Priced Property Investment Opportunity in Liverpool

Off-plan properties are essentially homes that are not yet complete but are still available for investments. With off-plan, investors are met by a range of attractive benefits that they wouldn’t otherwise get with another property type such as a period property. One of the main selling points of off-plan properties is the capital growth potential. Since an off-plan property is still in the development stage, there’s a chance that the property could increase in value even before it’s complete. The likelihood of this is even stronger in areas with existing capital growth potential such as Liverpool and Manchester, where there’s also a high demand for new buy to let properties.

One quality that new builds and off-plan properties share is the fact that tenants will be the first, or one of the first, to rent the property. Not only this, but newly built properties are also a lot more eco-friendly, saving around £629 a year on energy bills. Since a lot of young people are now becoming more conscious of environmental issues, new build and off-plan properties are a good idea for investors that want to attract this type of tenant moving into 2019.

Purpose built student accommodation is another booming market when it comes to property types. In 2018, levels of student accommodation were higher than the historic five-year average, reaching £1.9 billion in quarter 1 and quarter 2. Home to some of the best universities in the world, the UK welcomes high numbers of students year after year, including those from overseas. Liverpool and Manchester have a combined student population of over 160,000 students and remain some of the most popular UK student cities, meaning that the high demand we saw for student accommodation in 2018 is expected to continue into 2019.

Property Investment Checklist

Interested in investing in property? Read the information on our property investment checklist first to make sure your buy to let venture runs smoothly. 

  • Understand the buy to let process
    Property investment is a big commitment, so before going forward with your investment, make sure you’re fully clued up on the process.
  • Research the best locations
    Have you looked into the best areas for property investment? Research the locations that offer properties within your budget and the best return on investment.
  • Think about your target tenant
    The type of tenant you want your property to appeal to can dictate the location and property type of your investment, so spend some time deciding who your target tenant is.  
  • Consider the responsibilities of being a landlord
    Being a landlord brings a lot of responsibility. Research the in’s and out’s of being a landlord to ensure this side of the buy to let process runs smoothly.
  • Get clued up on financial issues
    Last but certainly not least, ensure you’re aware of the financial elements involved with the investment to avoid any nasty surprises further down the line.

FAQs

How does buy to let investment compare to other investments?

Unlike stocks and shares, the physical nature of property means you actually own the bricks and mortar. So, if the market changes or property prices fall you can hold on to your property until it is worth more again. There are many reasons to invest in buy to let, and specific properties have different advantages for different people. Due to the wide variety of buy to let properties available, you can find one that fits your goals perfectly, whether it is high monthly payments, long-term capital appreciation or a quick renovation project.

One Baltic Square - Property Investment Opportunity in Liverpool's Baltic Triangle

What are rental yields and how do I calculate them?

Rental yields tell you how much money you are making from the investment property you have purchased in the form of a percentage. This is an important calculation for working out how much income you can make from your property. Yields refer to the earnings that have been generated by the property and can be used to work out potential income and how quickly the property will start to pay for itself. A property’s rental yield is the annual rent received on a property as a percentage of its market price.

To calculate a rental yield, you need to take annual rental income and divide it by the purchase price of the property. The higher the rental yield, the quicker your investment will pay for itself. For example,

Rental Yields Calculation

If you are still wondering how to calculate rental yields, you can use our simple rental yield calculator. Whether you are an investment veteran with a bursting portfolio or a novice who wants to dip their toe into the waters, to make the best investments you need to make sure that the numbers add up.

Which areas will have the best rental yields in 2019?

The areas with the best rental yields in 2019 will be similar to those of 2018. We should see smaller towns like Burnley and Preston in the North West also showing strong rental yields. University towns and cities continue to provide some of the highest rental yields in the UK, and it is worth considering investing in city centre property too. For property investors in the UK, there are increasing opportunities to invest in student towns and cities. Many graduates are deciding to stay in the same city they studied in after they graduate, boosting demand for rental property further and increasing rental yields. Properties in city centres, close to amenities and university campuses or work centres are perfectly positioned to benefit from growing rental yields. The North West will continue to outperform the rest of the country where the buy to let yields by postcode are significantly higher.

RW Invest - Property Investment Opportunities

RW Invest

RW Invest is a market leader for property investment in the UK. With over 14 years experience and offices in Liverpool, London and Manchester, we specialise in buy to let student and residential properties, offering our clients the most exciting and profitable investment opportunities on the market.

Throughout our 14 years of business, we’ve built a trusted network of property investors, property developers, home builders, rental management companies, letting agents, estate agents and solicitors specialising in all areas of property investment.

We work hard to provide our investors with the best rental yields possible, only creating opportunities in areas of the UK with the strongest potential such as Liverpool and Manchester. We boast the largest direct sales team in the UK’s property investment sector, along with our superior client care team who are dedicated to making sure your experience with us runs as smoothly as possible. We build relationships and collaborate with both our partners and competitors, negotiating the lowest property prices possible and achieving below market rates.

With impeccable customer service, fantastic properties and expert knowledge, get in touch with our team today to begin your buy to let journey in 2019.

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