Wondering about the future of the property market in Britain? Thinking about where to invest, but not sure which market will bring you the most lucrative returns? Take a look at this guide of the best-projected property investment areas in the UK, based on rental yield.

UK property investment for rental yield

The importance of rental yield

Rental yield refers to the return you will get on your investment through the rent paid by potential tenants. For first time investors looking to invest, this figure is usually represented as a percentage, known as the ‘NET rental yield’, and is calculated as the yearly rental income amount versus purchase price and costs.

Looking at projections for the coming years, it is evident that the referendum result and its accompanying Brexit paranoia will not have an effect on the property market. Not only is London the only place in the country that has seen a reduction in yields in recent years, but average rental yields in the UK are set to increase with a national growth of 12.6%.

However, despite this positivity, some areas are better for investors than others, and can provide more lucrative rental returns out of the gate. Here are some of the key areas for consideration.

Liverpool

Liverpool’s property market is very much like the city itself: Vibrant and promising. With a huge student population of over 70,000 and a developing tech hub, the area is high in demand as it provides similar opportunities for working in the city as London traditionally did exclusively, just at a lower price.

One of the highest achieving areas in terms of rental yields in the country currently, Liverpool is far above the national average of 3.05%, at around 5.05%. Six of the cities’ postcodes were in the top 25 highest ranking buy-to-let areas in 2018, and the L7 postcode achieved an average of 9.79%.

RW Invest, a property investment company based in Liverpool, is among the many offering off-plan investment opportunities in this quickly developing city, to accommodate the growing demand and plant themselves firmly in the future of this promising area.

Off-plan investment refers to an investment project that has not yet been completed, meaning it is still in its planning stages. These sorts of projects have typically been looked upon by investors as risky, as the buyer will not have the chance to look over the property to decide on its quality before completion, although technology such as VR is working to combat this doubt by providing high-quality, CGI imagery and simulated viewings. This can also be beneficial for international investors.

Manchester

Deansgate, Manchester
photo credit: Mikey / Flickr

Manchester is another northern city with an abundance of opportunity rivalling the south. Its university student draw, accessibility via transport and ties to MediaCityUK make it a desirable area both to live and invest in.

In 2019, average rental yields in the city have reached 5.55%, and going forward its average rental growth is set to improve by an enormous 17.6%, leaps and bounds above Central London which sits at 3.0%, and even beating the national average of 12.6%.

Nottingham

Again, the area of Nottingham achieves some of the highest rental yields the country has to offer. With a quarter of its population aged between 16-24 looking for a rental property the opportunity here for investors is palpable.

The planned regeneration for attractions such as shopping centres will only make the city more attractive to potential tenants in future, and the city is also predicted to achieve high results in the future for capital growth.

Real estate investment growth

Capital growth in the UK

This piece focuses on the projected rental yields for the highlighted areas, but it would be remiss not to also mention the capital growth potential in some of these areas.

Capital growth (or capital appreciation) is an exciting prospect for buyers investing in the up-and-coming neighbourhoods of tomorrow, as they can often see the value of their purchase increase steadily. In Liverpool, for example, in its Baltic Triangle area, some of the off-plan properties are quickly increasing in value, meaning that by the time the projected has been completed they may have already benefitted.