Thinking of plunging into the rental property investment world in 2023? Your focus should be on regions that deliver the highest rental yields.
Now, what exactly is rental yield?
It’s the yearly rental income that a property brings in, divided by its total value.
It’s a simple formula: the more significant the rental yield, the more profitable your investment.
Why is this relevant?
Current trends reveal that the forecast for buy-to-let investors could be more sunny with soaring interest rates and a dip in property prices. However, while some potential homeowners might be reassessing their options, the foundational factors that support the buy-to-let market for investors remain sturdy and reliable.
Zoopla’s most recent Rental Market Report highlights an 11.1% increase in average rents for new-let properties over the past year. Although Zoopla anticipates a slowdown in rental growth, forecasting a range of 4% to 5% for this year, the longstanding supply and demand disparity that’s been an issue for ages isn’t likely to find resolution anytime soon.
In this blog, we will unveil the prime UK rental yield areas for 2023 and insightful advice on unearthing the finest investment prospects.
When contemplating buying or investing in UK property for 2023, there are several key factors to consider:
- PROPERTY PRICES: Evaluating current and anticipated property prices is critical. A stable or rising property market can be a good sign for investment.
- RENTAL YIELDS: High rental yield signifies that the property can generate a good return on your investment.
- TENANT DEMAND: It’s essential to consider the demand for rentals in the area. High tenant demand ensures consistent rental income.
- POPULATION: Population growth in an area often suggests potential for property value appreciation and rental demand.
- REGENERATION: Areas under regeneration typically present a wealth of opportunities, as they are likely to attract increased interest and investment.
- CAREER OPPORTUNITIES: Locations with many job opportunities attract more tenants, increasing rental demand.
- TENANT DEMOGRAPHICS: Understanding your potential tenants could help determine what type of property to invest in.
- BTL OPPORTUNITIES: Recognising areas with a high potential for Buy-To-Let (BTL) investments can ensure a steady flow of income.
- TRANSPORT LINKS: Good transport links often attract tenants, so investigating this aspect in potential investment areas is worth exploring.
By taking into account these variables, we can compose a comprehensive view of a location’s prospective buy-to-let performance. Additionally, this approach brings to light blossoming towns and cities that may not traditionally be on an investor’s radar. For prospective buyers, gaining insight into these metrics is an excellent strategy to determine potential UK property investment locations.
Over recent years, UK house prices have soared to unprecedented heights, underscoring the significant returns that property investment in the UK can yield for investors.
Below is the best:
With its continuous citywide refurbishment activities, Birmingham stands firm as one of the premier investment destinations for 2023. The Big City Plan, a colossal 20-year project aiming to transform the city, has now surpassed its midpoint.
This initiative has brought about significant enhancements to the city centre and numerous suburbs, alongside infrastructure and transport upgrades.
One of Birmingham’s most potent advantages is its affordability. Research by Knight Frank reveals that the city presents a more favourable ratio of average income to average property price when compared to the broader UK.
Boasting the fastest-growing tech industry and a robust financial sector, Birmingham continues to attract and retain a vast pool of talented professionals with disposable income.
Furthermore, Birmingham has consistently been the top choice for Londoners looking to relocate. With an under-25 population constituting 40% and a student retention rate standing at 49%, the city certainly promises a significant potential rental market.
Another powerhouse in the North, Leeds has rapidly earned recognition as a focal point for investors seeking sustained rental returns, making it a definite inclusion in our 2023 top UK property investment locations.
Currently, home to 812,000 residents, Leeds continually shines in the rental market. According to Zoopla’s Q3 2022 rental market report, Leeds ranks as the UK’s eighth-best area for rental growth, with an 11.4% increase in average rental income since Q4 2020 – a boon for investors seeking consistent tenant demand.
While capital growth has been modest compared to other locations on this list, rental demand in Leeds is surging. Savills predicts a 28% growth for Yorkshire by 2025, driven by increasing demand and several build-to-rent schemes in progress.
The UK PowerHouse report by Irwin Mitchell forecasts Leeds to rank amongst the top ten UK cities for job creation by 2023, with over 19,000 new jobs compared to 2021, driving more individuals to the town.
Over the past decade, Leeds has seen several regeneration projects amounting to over £3.9 billion, with an additional £7.3 billion projected for the future. It will positively impact property prices and rental incomes. Hence, Leeds also graces SevenCapital’s 2023 list of top regeneration hotspots.
With London’s property market experiencing lower growth than other parts of the UK, several key towns in the South East have taken the limelight, offering more affordability and still delivering connectivity with the capital.
Bracknell is one of these towns. Home to several globally renowned businesses such as Dell, Microsoft, and 3M, it’s also experiencing the kind of large-scale regeneration that attracts incredible demand, with property for sale in Bracknell becoming an increasingly popular alternative to the capital for homebuyers and those seeking worthwhile property investments.
According to UK House Price Index data, Bracknell’s property market has seen price rises of 249% over the last 20 years and grown by 19.79% in the previous five years alone. As of September 2022, property prices are still 25% lower than the average London property.
Furthermore, a £770 million regeneration plan impacts property prices positively, contributing to Savill’s average forecasting rises of 19.1% over the next five years.
Bracknell represents the opportunity to take advantage of long-term growth and consistent yields for investors interested in targeting the young, commuting professional demographic near London.
Manchester, the city that never sleeps, lives up to the hype as one of the most thrilling destinations for property investment. Over the past five years, it has delivered some of the most impressive capital appreciation returns, including a remarkable surge between 2017 and 2018. It catapulted it to the top three locations for price growth in the North. Urbanbubble confirms that rental earnings have soared by an impressive 19.5% in the last 12 months.
Hold on tight because the journey of growth doesn’t stop there! The future looks even brighter, with JLL’s house price forecast predicting a 17.4% rise in property prices across the North West in the next four years. Manchester’s booming economy and surging population have driven this tremendous growth, propelling the city to new heights in recent times.
And that’s not all – Manchester stands tall as a clear and vibrant alternative to London, especially in the lettings sector. The city’s allure lies in its many career opportunities in global businesses and stellar economic performance, ranking as the second-highest growth city among 30 major European counterparts in 2021.
Not to mention, Manchester boasts one of the youngest populations in the UK, with a staggering 38.7% aged between 18 and 35 years, creating a thriving rental market.
So, if you’re seeking a dynamic, promising, and prosperous investment hub, look no further than Manchester – the unstoppable Northern Powerhouse beckons you to join its incredible journey!
As the eighth largest city in the UK by population and the thriving heartbeat of the North East, Newcastle beckons with irresistible charm, offering affordability and fantastic rental yields that can’t be matched elsewhere in the UK.
Look no further than postcodes like NE1 and NE6, nestled at the city’s core, where high yields of approximately 8% to 9.2% are available. The average result of 7.7% citywide is no less impressive.
House Price Index data reveals that Newcastle’s average property prices remain a remarkable 33.6% lower than the UK average, creating an enticing opportunity for astute property investors to reap substantial returns.
Newcastle is not just about affordability; it’s a hotbed of education and innovation. As a leading university centre with one of the nation’s best graduate retention rates, the city attracts a bright pool of young professionals.
Unsurprisingly, Newcastle is also hailed as one of the fastest-growing regions for new start-up businesses. With this influx of ambitious talent, rental demand is set to soar, translating into even higher yields for savvy investors.
The city’s allure extends beyond academia and entrepreneurship. Boasting a diverse array of corporate headquarters and thriving education and digital sectors, Newcastle lays the groundwork for numerous career opportunities. It fuels the demand for rental properties and supports the entrepreneurial spirit that thrives throughout the city.
So, if you’re searching for a dynamic blend of affordability and prosperity, Newcastle stands ready to welcome you with open arms. Embrace the chance to be part of this thriving city’s success story and unlock the full potential of your property investments!
In the ever-evolving landscape of property investment, Liverpool remains a shining star in 2023, boasting gross solid rental yields of 7.02%, the second-highest in the North West, as per Zoopla’s latest report.
Over the past five years, property prices in Liverpool have soared, witnessing an impressive 42% increase, yet the city remains refreshingly affordable, with average prices standing 37% below the national average. This affordability and robust tenant demand have paved the way for some of the country’s highest-performing rental yield postcodes.
Enter L1, affectionately known as the Baltic Triangle, is a trendy locale that has delivered an annual rental yield of 8.1% in the recent past. But that’s not all; across the city, L7, home to the prestigious Royal Liverpool University Hospital, has been known to achieve phenomenal annual rental yields of 10%.
And the excitement doesn’t stop there! JLL’s prediction sends ripples of anticipation, forecasting a remarkable 21% rise in property prices for Liverpool over the next four years, mirroring the growth seen in Manchester.
Not only does Liverpool offer lucrative returns, but it also boasts an excellent income-to-house-price ratio of 4.9, showcasing its affordability compared to the strength of its workforce.
As a ‘sleeper hit’ in the UK property market, Nottingham has been making incredible strides, transforming into a premier area for property investment.
The accolades speak for themselves; Nottingham was once hailed as one of the top places to live by the Sunday Times, and its affordability continues to impress. In a revelation from the Zoopla House Price Index of June 2022, the city witnessed the country’s most significant property price increase at a staggering 10.7% from June 2021 to June 2022. Even over the last five years, Nottingham has seen the most effective price increase, reaching an impressive 39.18%, per our Land Registry data analysis.
Regarding rental yields, Nottingham shines brightly, topping the list of locations in the East Midlands with a robust gross rental profit of 6.49%, offering a healthy and regular return on investment. The city’s average rental yield soared by an impressive 13% from March 2021 to the same month in 2022, surpassing the UK average of 11%.
Fueling Nottingham’s rise is its strong economy and growth, as demonstrated in the Irwin Mitchell and the UK Powerhouse report, ranking 15th out of 50 cities for GVA growth, boasting £9.8 million in GVA and an impressive 7.4% GVA growth for Q4 2021.
The city’s vibrant atmosphere is fueled by two major UK universities, with Nottingham University securing the 118th spot globally and the 10th spot in the country, according to the QA World University Rankings 2023. This academic prowess creates an enormous demand for tenants, supported by a booming creative quarter that caters to the ever-growing graduate pool. Nottingham is undoubtedly a rising star in the property firmament, beckoning investors to embark on a journey of exceptional opportunities!
For aspiring property investors in the UK, 2023 presents a promising landscape with a host of prime locations to explore. Birmingham, Leeds, Bracknell, Manchester, Newcastle, and Nottingham stand out as dynamic hubs, each offering unique advantages and potential for high rental yields and long-term growth.
These cities boast vibrant economies, thriving rental markets, and continuous regeneration initiatives, making them hotspots for savvy investors seeking rewarding returns
At Reloc8 Em, we understand the importance of making informed investment decisions. Our expert team is committed to providing personalised advice and comprehensive insights to help you unlock the full potential of your property investments.
Whether you’re a seasoned investor or just starting your journey, trust Reloc8 Em to guide you towards prosperous opportunities in the ever-evolving UK property market. Invest with confidence and let your property dreams become a reality!