The UK’s population is projected to surpass the 70-million mark by 2031. If those numbers are anything to go by, it’s a clear sign that the demand for housing is on an unstoppable upward trajectory.
Despite the recent challenges brought on by the Brexit vote and COVID-19, the UK property market has remained a viable alternative for many investors. It points to the fact that property is, and continues to be, a leading asset for stability.
Even when the stock market took a hit in March after the lockdown was first announced, the property market remained largely unaffected, proving itself to be the most stable and high-yield investment for anyone looking for long-term alternatives.
Although students and young professionals tend to make up a huge chunk of the rental market, we’re now seeing a renaissance of the older population opting to downsize, particularly those who live in major cities around the UK. The question isn’t whether or not investing in property is the right move, but rather where to invest.
That being said, we’ve put together a comprehensive guide on the best place to invest in property in the UK. Let’s dive in.
Types of Property Investment Opportunities in the UK
The specific property you choose to invest in will depend on several factors. You need to identify what your specific needs are; whether you’re looking for a short-term or long-term endeavour; if you want to use it generate income or to deliver capital growth as the property’s value appreciates; or whether you want to use it to add to your retirement fund.
This needs to be clear from the get-go since it will advise the decision on the type of property to invest in. Here’s an overview of the opportunities available to UK investors looking to invest in North East England.
Buy-to-Let
Buy-to-let refers to the process of buying a property specifically to let it to a residential tenant. The idea behind investing in this kind of property is to generate short-term rental income that can go towards covering mortgage payments, as well as other costs like the general maintenance of the property.
Buy-to-lets can also generate long-term profits through capital growth as the market value of the property continues to grow over time. Before you invest in this kind of property, there are several things you need to keep in mind before you go all in.
Area
Different areas command different rates of capital growth and rental yields. Investing in Durham, Newcastle, Sunderland, or any other thriving city in the North East UK, for instance, is a great option since the property prices in the region have been on a steady rise over the last few years, compared to other places in the country.
You have two options when choosing to focus on a particular area. You can opt for an area where property prices rise, while rents remain stable, or pick an area where property prices remain stable while rents rise. The choice of one over the other all comes down to whether you’re looking for long-term or short-term gains.
Condition
One great way to potentially increase the value of your asset is by renovating it and then selling it for a profit. Nonetheless, if you’d rather skip all the elbow grease involved, and instead invest in a property that’s ready to rent immediately, that’s an option too.
Ownership
Owning property doesn’t exactly come cheap, much less if you’re looking to acquire a prime piece of property. To ease the financial load, you can choose to go the joint-ownership route by co-owning a property with other investors.
Keep in mind that you need to come up with an ironclad agreement on the terms of the ownership to avoid running into problems later down the line.
Stamp Duty
If you already own a property and want to purchase additional residential property to let or as a second home, you will have to pay a 3% Stamp Duty Land Tax (SDLT) surcharge on each of the threshold bands. It’s important to factor this in when looking at the overall cost of the property you want to acquire.
Single or Multi-Unit
For investors that intend to buy several properties at a go, you might be able to get a bulk discount when you purchase a multi-unit freehold block.
Liquidity
This is something else you need to think about when investing in a buy-to-let property. It’s one thing to put all your money into a piece of property. It’s a whole other ballgame if you need to access that cash at some point. It might take a while before you can.
Landlord Responsibilities
Investing in property to let means that you now assume the landlord role since you will, after all, have tenants on your property. Ensure that you understand what your legal rights are, as well as your responsibilities towards the people renting your property. This is especially important if this is the first buy-to-let property you’re investing in.
In addition to the factors we’ve listed so far, remember – your property will require upkeep and maintenance. There will also be times when it’s not at full occupancy. Your budget should adequately cover all these scenarios to avoid getting caught off-guard with expected expenses or reduced earnings for certain durations.
Commercial Property
Investing in commercial property generally falls into any of the following categories:
- Retail – Includes supermarkets, shopping centres, high street shops, and retail warehouses
- Office – Includes offices, office parks, multi-tenant, and mixed-use buildings
- Leisure – Includes hotels, restaurants, fitness centres, cinemas, and casinos
- Industrial – Includes warehouses, storage yards, sheds, and industrial, logistics or manufacturing units
Just like investing in a buy-to-let property, you need to understand the local demand. That way, you make an informed decision on the potential value the commercial property you’re interested in will generate.
Although investing in commercial property is a somewhat specialized area, there are several options available to investors if this is something you’re interested in pursuing.
- Direct investment – This involves buying an entire commercial property or owning a share of it
- Direct commercial property fund – This involves joining an investment scheme that pools resources to invest in a portfolio of commercial properties
- Property stocks and shares – This option involves trading in shares of property companies listed on the stock exchange
- Indirect property fund – This is similar to a direct commercial property fund in but, instead of pooling resources to invest directly in commercial properties, the fund buys stock in market-listed property companies
Buying Property Off-Plan or Off-Market
You don’t always have to wait until a property development is complete before you buy it. You can invest in a piece of property long before its completion date and, in some cases, before the project has even begun. This is known as off-plan buying and appeals to many investors for several reasons.
- It saves you a lot of money: The deposits required for new builds are significantly cheaper than what you would pay on a completed property
- You get to customise the property: Since you’re not looking at finished structure, you can influence the design, and even dictate the kind of fittings and fixtures you want to be installed
- You get great value for the money: Buying the property at a fixed price long before the date of completion means that you benefit from inflation on the total capital value of the property in question
- You capitalise on massive discounts: If you buy in bulk, you’ll likely get a massive discount, which cushions you against the effects of any potential market deflation
The best part about it is – you don’t have to wait until the development is complete to capitalize on your investment. You can “flip the contract” by selling it before its completion. Keep in mind that you can only do this if the contract you signed is assignable. Have a legal expert look it over before you sign on the dotted line.
Off-market buying, on the other hand, refers to buying a property privately from the property owner themselves, or through an agent. The keyword here is “privately” so you won’t find it advertised online, or in any marketing materials.
Land Investment
Just like with property, market demand can significantly influence the value of land in a particular area. Anytime you have major infrastructure projects in an area, the demand for land there goes up.
Ensure that you stay up-to-date with up and coming developments and government projects in an area. This can provide timely insights into potential investment opportunities that could drive up the value of properties there.
The first phase of the Sunderland infrastructure project, for instance, which commenced in February 2019, is now complete. The International Advanced Manufacturing Park (IAMP) is expected to create more than 7,000 new jobs over the next decade, which means you can expect an increase in the demand for housing in the region.
This is bound to drive up the property prices in the future, so if there ever was a prime opportunity to invest in property in the North East England region, it’s now.
Buying at an Auction
Buying property at an auction is a great way to save and capitalize on investment since they’re usually sold below the prevailing market rate. Keep in mind that winning an auction bid is considered legally binding.
It is, therefore, important to do all the necessary due diligence on a property to make sure it meets your expectations. You’ll also need to have your finances in order ahead of the auction date if you plan on bidding.
HMOs
If you want to get the best possible income from your property investment, Houses of Multiple Occupancy (HMOs) are a top choice for many investors. They are built close to hospitals and universities and can double or even triple the rental income you would otherwise get from a single unit.
All you would have to do is acquire a larger property, acquire the necessary licenses from the council, convert the majority of the rooms in the property into bedrooms, and start earning from the student and hospital staff tenants in the area. Alternatively, you could purchase a ready-made option instead of remodelling an existing unit.
Property Crowdfunding
Now, this isn’t your traditional route to property ownership. In this method, a group of investors get together and pool their funds to purchase a property asset. It is usually done on an online platform that manages the end-to-end investment process on behalf of the participating investors.
One major benefit of using this approach is that it allows you to invest in property using a significantly smaller amount of money compared to what you would spend to purchase an entire property on your own.
Depending on the platform you sign up on, the minimum required investment could be anywhere between £100 and £1,000. Realistically, you would need at least £15,000 to invest in the lowest end property if you want to see a reasonable return on your investment.
There are generally two types of property crowdfunding opportunities available to investors looking to acquire property in North East England.
- Equity crowdfunding – This refers to a pooled investment where a management company purchases rental property developments for capital gain and to generate returns from rental income
- Bridging financing – This is a pooled investment that goes towards short-term buy-to-let loans to borrowers, who then provide returns through interest
Best Place to Invest in Property in the UK
If you had to pick one place in the UK to invest in, you can’t go wrong with North East England. The region is rife with opportunities for growth and development, which means one thing – an influx of people to the region in the coming years and a subsequent increased demand for housing. Here are the top three places you can bank on.
Newcastle
There’s a reason this is top on our list. Newcastle is the economic powerhouse of the Northern region, with a rich cultural heritage, breathtaking architecture, and the welcoming nature of the residents. It’s the sort of place you fall in love with the moment you set foot there.
The property market in the region has seen steady growth over the last 10 years or so, compared to other cities like say, Manchester. Newcastle contributes well over £13 billion towards the UK’s GVA, which makes sense given the fact that Eldon Square, the city’s largest shopping centre, attracts 36 million+ visitors every year.
Aside from that, the population in Newcastle continues to grow rapidly, and the demand for flats and waterside apartments has seen a 25 per cent increase over the last few years. Despite this, the supply is still not sufficient enough to meet the rising demand, making property investment in the region a great option for those looking for lucrative yet reasonably-priced property.
You might be wondering where the best place to invest in property in Newcastle is. It all depends on the type of investment opportunity you’re looking for. If you’re interested in buy-to-let properties, we recommend that you check out East Pilgrim Street, which is right next to the city centre.
Sunderland
Sunderland is rapidly emerging as one of the UK’s top locations for property investment. It has a student population of 20,000, a 2 million+ workforce, and a population that’s projected to grow to 285,000 by 2033.
One of the things that make Sunderland such a lucrative property investment destination is the £1.5 billion worth of public and private sector money being invested in the city to transform it into a digital and manufacturing hub.
The UK government has dubbed the upcoming IAMP development a “nationally significant infrastructure project”. It offers strategic opportunities for retail, leisure, and business, which means now’s the time to invest in property in the area before prices skyrocket in the next few years.
Durham
Durham is yet another property-investment hotspot in the North East. It has built a sterling reputation over the years for being home to one of the finest universities in the UK. This makes student accommodation or HMOs in the region a top choice for property investors.
If you’re looking to invest in single buy-to-let properties in the area instead, your best bet would be to check out the surrounding villages. The property prices in the city centre can be quite high if you’re working with a small budget but the surrounding villages offer excellent return on your capital invested.
It’s always a good idea to speak to a property professional to guide you on which areas to focus on as this is critical to the success of any property portfolio.
Strike While the Iron’s Hot
You can’t go wrong with real estate property investments – that’s a fact. Unless, of course, you don’t do the required due diligence and end up sinking your entire life savings into a property that doesn’t generate the rental yield or capital growth you were hoping for.
If you’re looking for the best place to invest in property in the UK, the North East is no doubt an investor haven. With the on-going infrastructure development projects and the projected population growth in the coming years, the demand for housing will be at an all-time high. Now’s the time to strike before property prices rise beyond reach.
In the meantime, check out our blog for some pro tips on how to invest in property.