The Northern Powerhouse continues to make headway as it benefits from increased devolution powers and growing investments, and IP Global’s latest report has named Manchester, Birmingham, Liverpool and Leeds as the country’s main investment hotspots.
Investors looking for the best property investment prospects, strongest rental yields and highest levels of capital appreciation are being pointed towards the north of England in international property investment company IP Global’s latest quarterly Global Real Estate Outlook.
Alongside overseas investment centres such as Lisbon, Bangkok and Frankfurt, the report pins Manchester as a major property hotspot, with the focus now also encompassing outer areas such as Altrincham and Sale as well as central points that have seen the most investment over recent years. While JLL predicts rental growth to hit 16.5% over the next four years, average yields in the city are currently around 7%, with properties priced at an average £182,630 – a 10.4% rise over the past year according to the figures. Rents in Manchester are an average £1,016 per month, and 21% of all homes purchased in the city last year were bought by landlords, according to research.
Graham Davidson, managing director at Sequre Property Investment, said: “Investors who continue to chase capital growth in the south rather than switching to the north-west may find themselves struggling not only to break even on rental yields, but to make any capital growth profit.”
With the number of occupants in Birmingham expected to increase by around 171,000 to 1.3 million by 2039, the level of demand for homes is set to soar, making it a key investment prospect for potential buy-to-let landlords. Here, yields according to IP Global are 6.2% annually, while an average property can be bought for £200,430, which is 8.9% higher than last year.
While rents are £865 a month on average, many investors may start looking outside the prime areas of the city towards parts which are still up and coming in order to snap up better priced properties and further maximise their yields. The Birmingham area is set to be transformed for the 2022 Commonwealth Games, so investors who buy now will be set to benefit from this added investment.
In a recent report by Totally Money, a number of areas in Liverpool were named the best places for landlords to invest in order to reap the highest rental yields, with the L7 postcode bringing in average rental returns of a huge 12.63%. Across the city as a whole, average rental yields from Hampton International come in at a more modest but still impressive 8.2%.
Properties in Liverpool can be purchased for an average £140,160, a figure which has risen by 2.4% over the past year, while monthly rental has increased by 5.2% over the past 12 months to £765. Just over a quarter of all homes purchased last year (26%) were bought by landlords, with the growing numbers of students keeping occupation levels high for those who are willing to rent to them.
Although less landlords currently buy in Leeds than in the other cities (18%), yields of 6.8% can be achieved in the area, with average homes costing £196,720 and rents fetching £947 a month. Capital appreciation has benefited homeowners by an average of 4% over the past year, and rental growth is expected to rise by 18.8% by 2022, according to research.
IP Global’s report states that 90,000 new homes are needed by 2021, but just 60,000 are planned, meaning there will be a shortfall which could push up prices further. Hamish Pound, the head of investment at IP Global, said: “We advise investors to focus on supply and demand because an imbalance here is likely to provide the greatest gains.”