The UK property market resisted the worst of the economic uncertainty last year, and got off to a stronger start in 2023 than many anticipated. While it is true that growth is weaker than it has been in many years, the future is very positive – especially for property investors.
House prices and rents are both forecast to grow over the coming five-year cycle, which makes this the perfect time to expand a property portfolio ahead of the next upturn. Even at a time when growth has hit its lowest levels for years, the latest Office for National Statistics reports that the annual average house price increased by 6.3% year-on-year.
In the future, Savills anticipates 18% house price growth between 2024 and 2027, and 18.3% rental growth from 2023 to 2027.
With that in mind, where should you invest in UK property? Read on to find out about our top 5 UK places to invest in property in 2023.
Manchester
Manchester is the UK’s strongest housing market by many measures. It was the first of the UK’s major cities to record double digit house price growth again as we began exiting the pandemic according to the JLL Cities Index.
The same report shows that Manchester can expect this strong growth to continue into the future with a five-year forecast of 19.6% growth to look forward to.
Likewise, the city’s rental market is extremely strong. JLL recorded 22% rental growth in the last 12 months and anticipates 19.6% more over the next five years. Altogether, this makes it an ideal time to invest in the city and maximise your returns.
Why is this happening? Census data shows that Manchester’s population grew by almost 50,000 people in the last people. This is 9.7% growth – 50% faster than the UK average over that time period. What’s more, the Deloitte Manchester Crane Survey shows that a further 20,000 people may relocate to the city centre in the next three years.
This is a huge level of population growth and the rate of building simply cannot support it. The same Crane Survey notes that 11,759 new homes are in the pipeline for the next three years, including 17 new developments which is the highest figure for five years. Even though that is a huge number of new homes, it simply is not enough to meet the expected demand.
This is the key factor that will continue to push rents in Manchester higher and higher, with the strongest growth coming at the top end luxury market. With this and the expected property price growth taken into account, this is likely to be a good time to buy apartments in Manchester.
Want to learn more about the city and buy an apartment in Manchester? Click here today.
Birmingham
Birmingham is another extremely appealing market from the perspective of property investment in the UK. The average property value in the city has gone up by 27% in the last five years and predicts they will rise another 19.2% in the next five-year cycle.
Rental statistics are similarly positive, with annual rental growth of 18% confirmed and a further 19.3% growth anticipated by JLL by the end of 2027. This is remarkable in many ways and speaks to Birmingham’s popularity.
Much like Manchester, Birmingham has a major shortage of available properties. This is what is driving the growth, and the current rates of construction are not satisfactory to meet this demand.
The West Midlands needs approximately 16,500 new homes a year according the Deloitte Birmingham Crane Survey 2023, with most of those needed in Birmingham. In reality, only 2,398 new properties came to market in the city last year – a figure that in itself was record-breaking. Now, the pipeline of homes in construction contains just 13 schemes comprising a total of 6,487 residential units.
Even if all of them are completed soon, demand will still outstrip supply by a huge margin and continue to send house prices and average rents upwards. Birmingham is on the rise thanks to a huge level of investment into the city and an extremely successful Commonwealth Games in 2022. This is great news for investors and now may be the time to expand your portfolio with Birmingham property.
Want to see our available properties in Birmingham? Click here to learn more about the city and get in touch with our team today.
York
Our third entry in the UK’s top places to invest in property in 2023 is York. Located in the heart of Yorkshire, York is a stunning city that is extremely popular with businesses and has a world-class university which attracts students from around the world.
This ready-made tenant base is key for the city’s property market and keeps average house prices growing. 2022 saw rising interest rates and house prices in many places stall – but not in York. Reports from Halifax shows that York bucked this trend and recorded the strongest house price growth in the UK last year.
An average increase in value of 23.1% over 2022, or £69,648 in monetary terms, highlights how hot the York market is and offers landlords an opportunity not to be missed. The county of Yorkshire as a whole is forecast to see more than 22% property price growth between 2023 and 2027 according to the latest Savills forecasts, and much of that growth will be centred on cities like York which has a “housing unaffordability crisis” according to the local Council.
This crisis means more people than ever before will stay renting, and it also means it is likely demand will continue pushing prices up. This represents an opportunity for landlords who invest off-plan now and lock in a below-market price before the upturn really takes off.
Want to invest in York property? Click here to see the fantastic City Gate and get in touch with the team today.
Preston
The North West of England is one of the UK’s strongest property investment markets. Traditionally this has been due to the success of Liverpool and Manchester, as discussed above in the latter case.
Savills predicts in its latest regional forecasts that the North West is set for average house price growth of more than 22% by the end of 2027 – a number which will send many investors to the regional city powerhouses looking for the best properties.
However, the North West also contains the city of Preston which is on the rise and may represent an interesting alternative investment location for those looking to diversify their portfolios out of Manchester.
In particular, this could be a good option for those looking to invest in larger apartments. The relative rarity of three-bedroom properties on the city centre is making them highly desirable and in demand. This is a big opportunity for investors looking for something different in their portfolio.
Preston is a fast growing city with high quality jobs on offer and there are only 26 three-bedroom apartment available in the city out of a total of 321 apartments according to Rightmove. That is fewer than 10% and means that these larger apartments could be a good investment.
Want to learn more about investing in Preston? Click here to look at The Exchange and get in touch with the team today.
London
Finally, we turn to the capital city, London. Its property market needs no introduction – this is a reliable and mature market that offers dependable long-term returns to investors.
In the short-term, the London market is going through a small correction following years of runaway growth, JLL analysis suggesting we could see a 4% drop in average house prices over the course of 2023. However, the following bounce back in prices will be impressive, with the same analysis then forecasting growth of £125,000 in the average London house price by the end of 2027.
The rental market is performing more positively at present, with the Office for National Statistics recording average growth of 4% in 2022. When looking to the future, the picture is even better. The Savills regional rental forecast predicts rents in London will go up 18.3% between 2023 and 2027.
Overall, this leads to a picture of a city where investors who buy now at the lower part of the cycle could stand to make substantial profits in the future. With London house prices so high, there will never be a time to get in on what might end up being a relative ‘ground floor’ ahead of serious growth in the coming years.
Want to invest in London property? Click here to learn more about The Residence and speak to our team today.
Ronald Garrett, Managing Director of Alliance Investments, says: “2023 has been a great year for property investors. Cities such as Manchester, Birmingham and others have seen major growth which landlords can make the most of.
“Buy to let investment is a long-term prospect and being able to take that longer view is the key to success. The economic uncertainty of the past year is actually an opportunity if you put your money in the right place and choose the best markets.”
Want to learn more about buy to let investment in the UK? Contact our team today by clicking here.
