Category: Real Estate News
Finding the right property investment for you is a tricky task and can take a long time.
Ensuring you are putting your money in the right place is vital, as making a bad investment will waste both your time and funds, leaving you at a serious loss. Property investment comes with a high price tag, so making the right choice is essential.
With that in mind, we’ve used our expert knowledge to put together this blog, to give you the information you need to help you with choosing an investment property.
1. Understand What You Want from Property Investment
Before you make any major decisions on where you want to invest your money, you must understand why you are investing and have concrete goals that you are working towards.
Are you investing to make the most of capital appreciation or are you focused more on rental income?
Do you want to establish a portfolio of properties or focus on owning just one or two?
How long do you want to be investing for? Do you see property investment as something you can do for decades, or just a few years?
By asking yourself these kinds of questions, you can get a better sense of what you want from property investment, which will help you with choosing an investment property.
2. Find the Right Area
No two investment properties are the same, and one of the biggest factors that will affect how big of a return you make is the area that the property is in.
Property markets fluctuate from city to city in a variety of ways. Even different postcodes in the same city can cause a property to change in value, so researching areas you want to invest in is important.
When searching for the right area to help with choosing a property investment, you should focus on these criteria:
- House prices – Try to look for affordable prices that have risen in value over time, so you can benefit from capital appreciation. The Land Registry is a great tool for this, as their data tracks regions, counties and cities by their average house price over time.
- Rental Income – Try to find the average rents for the area you are researching, as this can give you a good indication of what rental income you will make.
- Career Opportunities – Finding out what companies are in the area is an important aspect as this will help inform what kind of tenants you can expect.
- Amenities and Local Landmarks – Finding out what kind of shops, restaurants, schools and cultural landmarks are in the area are also important, as tenants will want to be close to busy areas for convenience.
- Transport Links – Finding out what train stations, bus stops, major roads and cycle lanes are in the area is important, as areas that are well-connected are more popular.
City centres tend to have a great combination of these factors, making them ideal locations for property investment.
Depending on your target tenants, there will be other factors to consider. If you are investing in student property, for example, you should research how close the property is to university facilities, and what nightlife options are available in the area.
3. What Features Does the Property Have?
As we’ve already said, no two properties are the same, so when deciding how to choose an investment property, finding out as much as possible about the property itself is important.
Some things you should look out for and make sure you know are:
- What type of property is it?
- The size of the property – how many bedrooms does it have, what are the dimensions, how many bathrooms are there?
- The condition of the property – is it a new-build or an older property? Are there any repairs needed?
- The floor the property is on – in blocks of flats, units on higher levels have better views, so these can come with higher prices and also more rent.
- Any projected rental yields that the property has.
- Car parking/cycle storage.
- Amenities such as a reception, a gym, laundrette, common rooms/lounges.
- If the property is fully completed or if construction still needs to be done.
- Does it have Serviced facilities available – A good example of a property developer that provides these is RWinvest, a UK based Off Plan property specialist.
These factors will not only affect the price of the property, but also the kind of rent you can charge. This is important information for investors to know, as it gives you a much clearer picture of what your money will be going towards. Why not read our Property Investment guide for some inspiration.
If you know who developed the property, try researching other projects of theirs to get a clearer picture of how trustworthy they are, and what kind of quality you can expect from the finished product.
Visit the property yourself to see it in person, and if this is not available, get as much information as you can, such as floor plans or virtual tours.
By following these tips, you will have a better understanding of how to choose an investment property.
Choosing a property investment is a difficult task and can have dire consequences if you get it wrong.
No matter what you do, ensure you do as much research as possible for you to feel comfortable. It is better to do too much research than not enough when it comes to choosing the right property investment, if only to give you peace of mind.
Despite repeatedly raising interest rates to combat inflation, the Bank of England has recently provided reassurance against higher interest rates which could have potentially catastrophic effects on the property market.
In June 2023, the Bank of England raised the UK’s base rate of interest by 0.5% to 5%. This is the highest base interest rate that the UK has seen since the 2008 financial crisis.
This is the 13th consecutive raise in interest rates enacted by the Bank of England as it battles to combat the rising rates of inflation that the UK has seen, which has caused prices of everything from energy to groceries to rise repeatedly.
Higher interest rates encourage people to save money rather than borrowing, which will mean many will spend less money overall. If spending across a large scale decreases, then it is likely that prices will grow at a slower rate or begin to fall again.
However, this has had some major effects on the property market, as interest rates on mortgages have risen dramatically in recent months. This has dissuaded many potential buyers from jumping onto the market, causing the number of sales and transactions to drop.
In July 2023, the average interest rate for a five-year fixed mortgage deal jumped above 6%, the highest interest rate since November. For those on a variable-rate mortgage, this is likely to be even higher.
Sky News are reporting nearly one million households are facing a raise in their mortgage payments of £500 a month or more by 2026, putting immense strain on the market.
It is expected that further inflation would continue to have a detrimental effect on the market, as mortgages would become more unaffordable for many buyers, causing sales and house prices to fall further than they already have.
Many properties would be put on the market as homeowners would be unable to keep up with the rising interest rates.
Allan Monks, a leading economist working for JP Morgan, put out a bold prediction that interest rates would rise as high as 7% in the near future due to an inability to stop the rate of inflation.
Naturally, such a reputable source reporting such a dire forecast has many worried about what the future holds. Housing experts have warned that a base interest rate that high would be ‘game over’ for the property market, with some predicting a crash as bad as the one that happened in 2008.
However, several financial and property experts have recently been quoted as saying there is no need to panic, reassuring against such drastic measures.
Professor Abhinay Muthoo, a fellow at the National Institute for Economic and Social Research, was quoted by The Independent as stating that there is ‘no need to panic’ as the UK is ‘not in a 2007-8 scenario’.
He believes that there will be a period of financial uncertainty before things improve, but that ‘nothing crazy like double digits’ would happen to mortgage interest rates.
Other experts quoted by The Independent believe that although ‘there would be massive consequences for the economy and the housing market’ should rates rise to 7% or higher, they do not believe that rates will need to rise that highly, and that a smaller raise to 6% or less would ‘quite reliably strip inflation out of the economy’.
With this in mind, it is likely that interest rates will rise further in 2023, but not to such extreme levels. While this may put added strain on the property market, predicting an all-out crash would be a far-out forecast.
Some areas of the UK are performing better than others in 2023 when it comes to the property market, but there is one region that stands head and shoulders above the rest – the North West.
With major cities like Liverpool and Manchester, as well as thriving towns such as Crosby, Wigan and Chorley, there are many property markets in the North-West that have benefited immensely from the favourable economic climates of recent years.
Property experts Savills have predicted that the North-West will see the highest price growth of any region in the UK, with prices set to rise by an eye-watering 11.7% by 2027.
There are numerous reasons why this is the case, from affordable house prices giving room for substantial growth, to massive regeneration efforts across the entire region.
Let’s get into it.
Affordable House Prices
The North-West has some of the most affordable house prices in the entire nation, making it an ideal landing spot for those seeking to jump onto the property ladder or for those looking for a cheaper property.
For example, London has a current average property price of £726,839 according to Zoopla. Compare this with Liverpool’s average price of £196,181, and you see a difference in price of over 370%!
Even when you compare London to Manchester, a larger city in the North-West with higher house prices than Liverpool, the North-West city is still over 286% cheaper than the UK’s capital.
This is a big reason why the North-West’s property market is thriving in 2023, as it is much more affordable to buy property than in other areas of the UK.
Incredible Price Growth
Combined with the affordable prices the area has to offer, the North-West has seen house prices grow considerably over recent years, while expert projections predict that future growth will similarly lead the UK.
Land Registry data indicates that the North-West has seen price growth of nearly 35% in the five years since 2018. Taking into account we’ve seen a global pandemic and a cost of living crisis during this time, that is an impressive feat.
Taking a closer look and some cities in the North-West performed better than the already outstanding regional average. Liverpool, for instance, has a five-year growth of over 43%. In real money terms, this is a jump of over £50,000!
Given the already affordable house prices in the region, there has been more room for growth in the North-West compared to other areas of the UK. When combined with other factors mentioned in this blog, it is easy to see why the North-West has lived up to its potential.
In terms of future growth, the North-West is at the top of Savills’ predictions for the UK, with a predicted five-year price growth of 11.7%. Whilst this isn’t as high as the last five years have been, this is because the UK property market is facing reduced growth across the board rather than any difficulties within the region.
Major regeneration schemes and funding all over the North-West have helped to draw newcomers to the region whilst raising property prices in previously run-down areas.
In Liverpool alone, there have been several major regeneration schemes that have put billions into the city’s economy. Between the Baltic Triangle, Liverpool Waters, the Knowledge Quarter and LiverpoolONE, there have been many major efforts that have transformed Liverpool’s landscape and skyline completely.
Manchester is not one to lag behind in this regard, as there has been plenty of Manchester city-centre regeneration. MediaCityUK has become a thriving hub of startups and big businesses, while Spinningfields is injecting £1.5 billion to the city’s economy.
Other areas of the North-West are also benefiting from regeneration efforts. Wigan’s town centre is being redesigned in a major £135 million project, while the Bootle Strand district is seeing a £20m investment from Sefton Council.
Anywhere you look in the North-West, you’ll see regeneration projects and the positive effects they bring.
Thanks in part to the aforementioned regeneration schemes, the economy of the North-West is thriving, making it a fruitful ground for new businesses and homeowners alike.
Both Manchester and Liverpool were placed in the global top 10 locations for startups by Startup Genome thanks to the high concentration of STEM graduates, successful research hubs and funding. Estimates place the North-West’s startup economy as being worth around $9.2 billion.
Outside of startups, the North-West accounts for 10% of the UK’s GBP, making it a valuable region. Technology, media and telecoms are some of the area’s largest sectors, with major employers like Sony, the BBC and BT employing thousands across the North-West.
This makes the North-West one of the most thriving economies in the UK, which is a big reason why the property market is doing so well. Professionals are moving to the region to make the most of the incredible career opportunities, while businesses are choosing the North-West thanks to the incredible benefits of operating in the area.
The student housing sector is an important aspect of any property market. There are approximately 2.2 million full-time students in the UK, the majority of whom need term-time accommodation that is close to their universities and affordable.
This number is growing as well, with the 2020/21 academic year seeing the UK’s student population rise by 8%. Therefore the need for a strong student property market is also rising, and the North-West is more than up to the task.
There are several prestigious universities in the North-West region. The Times Higher Education top 100 universities in the UK has 8 North-West universities in the rankings, with the University of Manchester in the top 10 and Lancaster University and the University of Liverpool in the top 25.
Thanks to the range of popular and respected institutions in the North-West, the student market is thriving, with thousands moving to areas such as Liverpool, Manchester and Ormskirk to study.