Where to invest
Manchester is unquestionably the economic fulcrum of the North West and, arguably, could lay claim to have now become the UK’s second city. Once renowned for its glorious industrial heritage, Manchester is now a thriving and vibrant modern city which can compete on a global level because of its world-class transport infrastructure, leading educational institutions and strong resilient commercial, service and retail sectors.
It is home to a population of over 2.6 million, and attracts over 100,000 home-grown and overseas students every year. It’s sporting prowess, music scene and arts culture have also played their part in attracting not only increasing numbers of students , but also large enterprises and corporations like the BBC which has recently relocated 2,300 of its staff to new prestigious offices in the district of Salford Quays. Yet in spite of this affluence and new-found confidence, Manchester still remains a surprisingly affordable place to buy property. That, along with high yields, is why it is proving so attractive to property investors throughout the UK.
Manchester boasts one of the most resilient rental markets outside London. Average yields across the Manchester in 2013 are just under 7 per cent, according to HSBC on an average property cost of £102, 631. Yields in the London Boroughs of Kensington and Chelsea, by comparison, only averaged between 3.3 and 3.4 per cent. What makes Manchester particularly attractive for investors are the wide-spread development and regeneration in the city centre such as the Northern Quarter and Ancoats. The city is home to the University of Manchester, Manchester Metropolitan University and the Manchester Business School. All of these institutions regularly attract large numbers of home-grown students looking for quality accommodation. What makes Manchester unique is the large number of overseas students it also attracts year on year. The last published figures in the academic year 2010/11, showed that the city attracted 10, 490 international students – over 26 per cent of the total student population.
This influx of visitors has created increased demand for high-quality student accommodation in the city centre itself as well as in the popular outlying suburbs of Didsbury, Fallowfield Withington, Rusholme, Chorlton, Whalley Range, and Levenshulme. All of these areas are popular with investors and offer affordable property which delivers above-average yields.
Sheffield is England’s fourth-largest city, and is a thriving and modern metropolis with a population of over 500,000. It is one of the UK’s most-popular destinations for students, and regularly attracts over 57,000 domestic and overseas students, many of whom choose to stay, or return, and settle there after graduation. Sheffield has two large universities and one of the largest further education colleges in Britain, so naturally there is an enormous demand for high-quality rental property in the city. Sheffield lies in the centre of the UK and has fantastic road and rail transport links which make it easily accessible. With 4 airports, including the UK’s newest international airport, within an hour’s drive from Sheffield, it is easy to get to from overseas destinations. The recently-refurbished mainline train station in Sheffield now offers an impressive entry to the city, with fast direct links to and from London and Scotland. A number of cross-country routes link Sheffield directly with cities and towns in all 4 corners of the country.
In Sheffield the rental investment property market is vibrant. Purchasing a property is out of reach for many people, particularly the younger generation; so they are increasingly relying on the rental sector for homes. Unfortunately the sector cannot provide these homes fast enough. According to Knight Frank, Sheffield’s rental market is the backbone and driving force of the city’s property sector. Rental properties in Sheffield city centre are snapped up in an average of three days with up to five tenants vying for each available property:
“Sheffield is at a massive advantage over other major northern cities, benefitting from its location, strength of the rental market and relative undersupply of city centre residential units. The strength of the rental market can also be attributed to the limited number of high-quality centrally-located schemes in Sheffield, especially when compared with other regional centres across the UK.”
Yields on one bedroom flats averaged over 7 per cent in 2012: yields on 2 bedroom flats and 3 bedroom houses averaged between 7 and 8.5 percent for the same period. What makes Sheffield particularly attractive for landlords and those looking to expand their housing portfolios is cheap housing and high yields.
As Britain’s second-largest city, Birmingham already attracts hundreds of thousands of people each year to live, work and study. With the £600m Birmingham New Station development project, a £128m extension to the Metro, a £65m runway extension at Birmingham International Airport (BHX), a £1.3Bn investment at Selly Oak, £181m capital expenditure on various major transportation schemes and the newly approved £32Bn HS2 rail link to London, the infrastructural face of Birmingham is changing rapidly.
Birmingham has three Universities, a flourishing student population, and superb road, rail and air links. It is a major international commercial centre, ranked as an important transport, retail, events and conference hub, attracting individuals, business start-ups and multinational organisations like Jaguar Land Rover, Cadbury, Trebor Bassett, Goodyear, Dunlop, Price Waterhouse Cooper, Deloitte & Touche and Eversheds.
Given all this inward investment it should come as no surprise that Birmingham has recently been voted as one of Britain’s top 10 investment hotspots. Investment property in Birmingham is very popular at the moment. That’s because Birmingham offers affordable properties which give exceptional returns and rental yields that few other parts of the UK can match. With traditional 3 bedroom houses costing less than £100,000, there is a clear incentive to invest in Birmingham, especially when figures from HSBC point to average rental yields of between 6 and 7 per cent in 2012.
Liverpool has one of the UK’s fastest growing economies outside of London. It has a population of just over 450,000 and is home to over 13,500 businesses. Liverpool generates a gross value added (GVA) of more than £7 billion, according to the Liverpool Economic Development Forum. It was the European Capital of Culture in 2008, and this brought significant inward investment and redevelopment funding from the EU. The culture-led renaissance saw Liverpool’s historic waterfront receive UNESCO World Heritage status, and on the back of this a number of ambitious investment developments were undertaken in and around the former docks.
New build homes were constructed and new leisure, retail and cultural attractions were built including the UK’s largest open-air shopping centre at Liverpool One and the new Liverpool Museum. Planning permission has also been granted for the large-scale redevelopment of the docks and a floating container terminal. This will once more bring large container ships back into the heart of the city and create many new jobs and add to the city’s burgeoning prosperity.
The city’s three universities continue to expand and this has resulted in Liverpool enjoying the significant growth in student accommodation in the past year, making it now one of the leading student regions in the UK. Liverpool is now home to over 50,000 students, but demand is in danger of outstripping supply. A recent report from Knight Frank identified Liverpool as the highest yielding city for student investment property in the UK, growing by over 13% in 2010 in comparison with just 5% in London. As such, upwards pressure on rental yields in the region has resulted in a number of high quality new student accommodation developments being launched within the Liverpool and Greater Merseyside area.
London is the administrative, economic, political and legal centre of the United Kingdom. It’s a leading global city with close to 12 million inhabitants. London’s economic importance is central to the prosperity of the UK. London, alongside New York, is regarded as one of the world’s major financial centres and it gross added value (GVA) of £275 billion is proof of this.
London consists of 32 boroughs straddling the River Thames. House prices vary across the boroughs, but generally they are driven by the proximity to central London and the City of Westminster. The closer to the centre: the more expensive. In spite of the high price of property in London, it is still a great place to invest in. The capital’s residential property sector offers investors great potential because of an inherent shortage in supply of new homes and an increasing demand for high-quality rental accommodation. The imbalance between supply and demand is widening, meaning that there has never been a better time to invest in London than now.
Recent figures show London’s average residential market rental yields continue to maintain their level at around 4.8 per cent. These yields do not compare with those in other cities in the country like Manchester, Liverpool, Sheffield and Birmingham. However, what London loses in terms of yield, it more than makes up for with capital appreciation. When other parts of the country have seen house prices fall; London has seen its house prices grow dramatically.