Where in the UK should you invest in property? It's not just about finding up and coming hotspots you also need to know what to look for...
Every year there are lots of pieces of research and experts who claim to know the next ‘hotspot’ to buy property in the UK.
Currently, some researchers and forecasters suggest areas such as the Northern Powerhouse are likely to be the next best places to buy, which includes cities like Manchester and Liverpool. Others use a different measure for buy-to-let investors, which favour areas with high yields such as, Glasgow, Middlesbrough and Nottingham.
*Sources: lovemoney.com, zoopla.co.uk
The problem with these supposed ‘hotspots’ or ‘high yielding areas’ is they miss the real ‘trick’ when it comes to purchasing a great property investment deal.
“Find an area that’s seeing genuine economic and infrastructure changes. A great example of this is the Cambridge-Oxford-Milton Keynes Arc” – Kate Faulkner.
In this video, we interview Kate Faulkner and dig into some of the big questions landlords are asking today. Is now a good time to be investing in property? And how do you identify a property that you know will make a profit in the long run?
Learn more about Kate Faulkner here.
For me, it’s less about ‘an area’ and more about buying a particular property on a specific street and hopefully purchasing it at a discount against the true market value. This way you build in instant capital growth and improve your yields from day one too.
The other important thing to check before you invest in property is what’s been happening to house prices over time rather than the regularly published year on year rises – or falls. For example, if you are looking at buying in the North East, in the year during the pandemic, prices here went up year on year by 14% for March 21 vs 20, so you might think it’s not a great place to buy having seen such huge growth. However, since 2007 – the last height of the market – prices, including this big rise are still only 5% higher, which is a tiny increase over a 14 year period which makes properties here, still ‘good value’.
The reality is we can do much better than just identifying hotspots with the free data that’s available. For example, look at the current properties you own, or those you are looking to buy, and check, via sold property prices on portals, how prices have grown over the last 20+ years.
Firstly, if you can, find an area that’s seeing genuine economic and infrastructure changes.
A great example of this is the Cambridge-Oxford-Milton Keynes Arc. Many people who invested in London and are struggling to continue to do so due to the additional stamp duty cost, have automatically moved their sights to Manchester or areas like Nottingham, but completely missed the potential return on these areas which are nearer to home.
There is no doubt that parts of Manchester and Nottingham will do well, but when you investigate these areas properly by looking at individual property performance on a street, you’ll be shocked to find properties selling for less than they were bought for back in the last crash in 2007 or for no more than they sold for in the early 2000s.
The reason for this is because you can’t just declare a massive area as a ‘hotspot’ you have to find a combination of changes to the economy and infrastructure, but then work out how these will cause a growth in demand and shortage in supply.
What makes the Cambridge-Oxford Arc one to watch is that it’s within close distance of London, our capital city, so these areas will definitely benefit from any exodus due to high prices and the post-pandemic desire to live somewhere more rural.
Secondly, their economies are incredibly strong, boosted by their worldwide renowned universities. Their plan by 2050 (only just over 20 years away) is to be:-
“the world-leading place for high-value growth, innovation and productivity. A global hub where ideas and companies are generated and thrive, home to exemplary models of 21st century development, with a high-quality environment and outstanding quality of life, and with a strong economic focus that drives inclusive clean growth.” Source
And the important thing to bear in mind is this isn’t just an ambition, it’s something they have already proven they can deliver. The area has over 3.8 million residents, hugely successful high-tech clusters and science parks, which are already delivering 2 million jobs and across the region, there are 10 universities. All of these sectors needs good quality rental stock, which means they offer excellent potential for existing and new investors to capture different tenant target markets.
Finally, the plans to improve the infrastructure are vast. Anyone who has driven up and down the new A14 will know what a huge difference the expansion of this road is delivering. But the grand plan is to link this infrastructure investment with more homes to allow these areas to continue to expand. Currently, 75,000 homes are expected to be built, partly thanks to this new road system and partly due to the planned investment to have an electrified east-west rail link to improve connectivity.
With all this expansion expected in this area, you can look at buying in Oxford or Cambridge, but it’s also worth looking at commutable areas nearby that are cheaper and still have the option of a London commute too. Effectively, once you have found a ‘hotspot’ with lots of investment, you then need to find places, streets and properties which are ‘under-valued’ in comparison to their surrounding area. One place that fits this bill is Peterborough. It hasn’t got the amazing history of Cambridge or Oxford, and in some parts still looks like it’s in the 1960s. But it’s 45 minutes on the train to London and properties can be bought for less than £150,000, so cheaper to buy and offers better yields.
Remember though, it’s about identifying an area that’s going to receive good investment, and appreciating this won’t impact every property on every street. What matters once you have found a good one are understanding the best property types to buy and let from now into the future and then trying to secure a great deal on the property to boost your capital growth and yields.