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The capital of England, London, is known for having incredibly high property prices, and rental prices. However, the UK housing market is growing at a rate that London can not compete with. There are several reasons this is the case, with the cost of living increasing, flexible working and better transport links all allowing tenants more options of areas to live.
Now investors are starting to look North for lower property prices and higher rental yields. Many northern cities are currently undergoing regeneration projects, which aim to increase retention, the quality of life and strengthen the local economy of northern cities. The UK government is also focused on levelling up in the north, causing a property price boom outside of London.
Below is the property price growth in different areas, according to the latest market report by Zoopla.
As businesses have started to move out of London, due to the expense of office space, there has been an increase in rental demand in areas outside of London. The capital has felt the effect, with a drop in house prices. Workers nationwide are slowly migrating from London because of the rise in the cost of living and working from home or hybrid working.
Property prices outside of London are growing at up to twice the rate, due to high demand. The UK government has also invested heavily in the improvement of rail links across the nation, making it easier for London-based workers to commute. This is not expected to slow down, as many employers are willing to cast a wider net to source skilled professionals.
Investors are aware that property prices in London are exponentially high when compared to the rest of the UK. When buying property in London, the square footage of an average property is small. So, with rental prices being high investors would expect high yields, but this is not the case.
The average property in London costs £526,000, over twice the cost of almost any other area in the UK. An example of this is Manchester where property prices are currently £219,700, according to the latest report from Zoopla. Therefore, investors should look to secure more properties in other locations, to secure a diverse portfolio. Owning property in multiple locations allows investors to take advantage of several high-yielding properties nationwide and will provide multiple streams of passive income.
Amongst the highest-yielding properties, the highest are usually found north of London. On the list of top-yielding areas are Manchester, Leeds, Nottingham, and Birmingham. These areas have high rental demand as an increase of skilled professionals are opting to move out of London.
Although UK property has an average yield of 3.63%, in some areas properties can yield as much as 8%. These are typically areas where property prices are low but rental demand remains high, likely because of Generation Rent. Targeting these areas can be difficult but by using knowledgeable investment consultants, landlords will be able to achieve their investing goals.
Investors looking to achieve capital gain from their property portfolio will want to monitor the growth of their areas of choice. In London, property prices dropped in the past 5 years and have since only recently started a steady incline of 4.4% year on year. However, north of London, cities including Liverpool, Manchester, and Leeds are seeing a climb of between 8.5% and 9.3% year on year.
These increases can assure strong capital growth, with many of these cities closing the property price gap with London. Also, many cities are continuing to develop and regenerate, which is improving local economies and in turn, growing property prices.
Areas such as Manchester, Liverpool and Birmingham currently have regeneration projects ongoing. This should only further boost their local economy, boost the quality of life for residents and attract businesses. With this boost, the population of professionals in the area will also increase to reflect the investment in businesses and services.
This is great news for investors as rental demand further increases and new-build properties close to regeneration areas become available. These properties are often off-plan at a lower price, which will yield higher returns. First-time investors will want to make sure they reserve these properties early as they are in high demand, selling out in a matter of weeks.
The desire to own property in London is fading, making way for high-quality, high-yielding properties outside of the capital. The UK is theoretically becoming much smaller as workers are offered more flexibility. Government investment in rail services and commuter areas means that even professionals who work in London will often opt to live further afield.
With a lower cost of entry and more secure investment opportunities available north of London, investors will be looking to capitalise.
CityRise has some fantastic high-yielding development available for investment, here.
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