Property investors thinking of purchasing a rental property should carefully consider the best UK postcodes that deliver a combination of high demand from tenants and offer good capital growth prospects.
In this article, we take a look at some of the cities expected to see rising house prices and rental demand and the UK postcodes that could be the best place to buy property in 2022.
What to Look for in a Rental Property
When considering the best postcodes for property investors, investors are advised to seek out places with a growing population, career opportunities and tenant demand in areas of regeneration and gentrification – all these are good indicators that property will be in demand from tenants and that there are capital gains to be made.
Where is the Highest Rental Demand in the UK?
Birmingham has one of the strongest demands for rental accommodation in the UK. A major factor fueling this growth is a shortfall in housing stock. In 2022, there are 39% fewer homes available to rent compared to the same time a year ago.
In 2022, rents in Birmingham are predicted to rise 12.5%. The city centre BD1 postcode is one of the best buy-to-let areas, and last year landlords saw average rents increase 6.9% (this was in part driven by a drop in supply as landlords cashed in on the record property price levels). The average price of a property in the BD1 postcode is currently £187,700.
In 2022, the Commonwealth Games are set to put an international spotlight on Birmingham and £750 million in investment has been put aside to ensure the legacy of the Games in the coming years. With incoming investment set to improve the city and attract more residents, rental demand is set to continue to increase, offering great prospects for buy-to-let investors.
Where is the Cheapest Place to Buy Property in the UK?
While looking for the cheapest place to buy property in the UK, it’s still important to ensure there is a healthy tenant market. While it may not be the absolute cheapest place in the country, one city where investors can get a lot for their money due to relatively cheap property and strong rental demand is Liverpool.
Property prices are on average £100,000 cheaper in Liverpool than the UK average and have experienced average growth levels of 7.5% year-on-year.
What are the best postcodes in Liverpool? In the L1 postcode, investment and gentrification have transformed the area, making it a vibrant and attractive place to live. The average price for a property in Liverpool city centre is £119,000 and yields are currently 10% on average – some of the best rental yields in the UK and a great return for investors.
Looking to 2025, the average price of a property in Liverpool is set to increase by 28.8%, and rents by 17% over the same period. With a healthy and robust property price forecast, Liverpool makes a great destination for buy-to-let investors.
What Other Cities Offer Good Buy-to-Let Prospects?
Manchester is another city boasting some of the UK’s most attractive postcodes for investors.
In 2022, average property prices reached £231,000 – an increase of £13,000 in the past year alone.
Rental demand in Manchester has soared and sits between 5-7%. In the M5 postcode of Salford, rental yields can reach up to 10%. Salford is the location of Salford Quays waterfront and the iconic MediaCityUK development, home to names like ITV and the BBC. These companies and other international businesses are attracting young professionals to the area – a key rental demographic.
Out of all the cities in the UK, Manchester house prices in 2022 and beyond look promising. With a growing population and regeneration improving the city’s livability, there’s strong demand for rental properties and with the right property in the right area, landlords can make good returns.
When it comes to the best UK postcodes for property investors in 2022, the UK’s northern cities offer some great prospects. Combining a growing population, strong rental yields and capital growth prospects, there are plenty of postcodes with great potential.
Is it a good time to invest in property?
Future projections for the UK housing market are optimistic. Savills predicts that house prices will increase more than £40,000 to reach £370,785 in 2026. In 2022, we are still seeing a strong imbalance between housing supply and demand. In areas where the population is increasing and investment in the local area makes it increasingly appealing from a lifestyle perspective, it can be a good time to invest in property indeed.
What is the average rental yield in the UK?
Looking across the whole of the UK, the average rental yield is currently 3.63%. Advice for landlords is to look for properties that offer an average yield of 5%. Anything over 5% is considered a strong rental yield. Landlords should seek out relatively affordable properties in locations where demand is set to grow over time.