Buy-to-let properties are perfect for investors looking to earn a passive income and secure their financial future. However, to maximise the return on investment, the most crucial element is choosing the ideal location. In 2023, several hotspots deserve your attention. Find out more about them and discover what makes a place a hotspot for buy-to-let investment.
What to consider before investing:
- Average rent in the area
According to TK Property Group, a property investment company that offers residential buy-to-let opportunities, the average rent in an area is one of the most important factors to consider when evaluating a location. A high average rent indicates that there is a strong demand for rental properties and that the investment has the potential to generate a significant return. On the other hand, a low average rent may indicate a weak market condition.
It is also essential to consider other factors, such as the local economy and employment prospects. Additionally, an abundance of rental properties may result in increased competition and lower average rent prices.
It is also essential to understand the reasons for the demand for rental property in an area. High interest in rental property in a city with a robust local economy and employment prospects may indicate that the market is driven by a growing population and a desire for convenient and attractive living spaces. Increased demand in an area with a weak economy may indicate problems with supply.
- Employment prospects
When evaluating employment prospects, it is vital to consider the types of industries and businesses present in the area and their growth potential. For example, a thriving tech industry or a growing healthcare sector can indicate a positive job outlook. In contrast, an economy dependent on tourism might struggle during the off-season. Additionally, analyse the average salary and the cost of living.
- Area’s shopping and entertainment features
A neighbourhood’s shopping and entertainment options also play a significant role in the demand as they contribute to the liveability and appeal of an area. Assess the availability and proximity of these amenities, as well as the quality and variety of options. The presence of grocery stores and pharmacies helps to attract families, while restaurants, bars and cultural attractions can make the area more appealing to young professionals.
Additionally, take into account the accessibility and walkability of the area. Zones with a high walk score and well-developed public transportation options can make it easier for potential tenants to access shopping and entertainment options without needing a car, which can be a significant factor in their decision to rent a property in the vicinity.
The presence of public services, such as schools, universities, hospitals, and clinics, are also major demand boosters.
The best buy-to-let hotspots for 2023
Based on the factors above, the best buy-to-let properties for 2023 are Manchester, Liverpool and Birmingham.
- Manchester
Manchester, located in the North West of England, has seen substantial growth and development in recent years. According to the census, the population of Manchester increased by 9.7% between 2011 and 2021.
The city centre has been a significant driver of this growth, with a construction boom delivering high-quality office spaces and flats, and attracting businesses and employees.
Employment increased by 17.2% between 2014 and 2018, outpacing the growth of any other UK city, including London. Manchester is also a popular destination for learners, with a student population of 100,000 and four universities. As a result, rental prices in Manchester are expected to increase by nearly 16.5% over the next few years.
The city is home to several top 100 FTSE companies, including Amazon, BBC, and Kellogg’s, further contributing to its thriving job market. With rental yields in Manchester averaging between 6% and 7%, the city is an excellent option for real estate investment.
- Liverpool
Liverpool’s population has increased by 4.2% in the last decade. The city’s job market has also been growing, with the percentage of employed individuals rising to 48.2% in 2021. Liverpool’s tourism industry fuels the local economy, attracting over 41 million visitors annually, contributing over £3 billion to the local economy and providing numerous job opportunities. The city’s student population, with over 70,000 enrolled in local universities, also supports the demand for rental properties. Rental prices in Liverpool are expected to increase by around 3% yearly over the next few years, with current rental yields averaging 5-6%. It makes Liverpool one of the UK’s most attractive cities for investment, both in terms of real estate and job opportunities.
- Birmingham
As the second largest city in the UK, behind London, Birmingham has experienced significant growth in its population (7% between 2011 and 2021), attracting many residents and businesses.
One of the key factors driving this expansion is the city’s excellent location, which makes it easily accessible from all parts of the country. This, combined with its diverse culture and vibrant economy, has made Birmingham a highly desirable place to live and work.
In recent years, Birmingham has also emerged as a buy-to-let hotspot, with rental prices expected to grow by around 4.7% yearly.
The high-speed HS2 railway, set to connect Birmingham to London and other major cities, will make travel faster and more convenient, thus ensuring the metropolis is even more accessible and attractive.
The buy-to-let market in the UK is expected to continue to grow in 2023, with cities such as Manchester, Liverpool and Birmingham leading the way. These cities offer a range of benefits to investors, including a growing population, a thriving local economy and excellent transport links. Whether you’re looking for a long-term investment or a more short-term opportunity, these cities are definitely worth considering.
