Updated for 2009, the following blog post examines the essential local idosyncracies and regional patterns when to choosing an area to invest. Investing in a good area could well make the difference when property prices start going back up again. We have compiled some pointers you should look out for when looking for an area of the UK to invest.
Regional Growth and Prospects:
Look out for positive growth factors to the local economy which could, in turn, boost demand for property (and therefore boost prices). Some things to look out for include:
- Regeneration – roads and public infrastructure / utilities;
- Transport;
- Health clinics;
- Schools
- Shops
- Entertainment (cinemas, bars, restaurants, cafés etc.)
If you are looking for HMOs, you should look for areas (usually in the city) where there are high populations of students, nurses, dock workers and close an airport and/or good transport links.
Aberdeen – despite mass reporting about an economic downturn and daily doses of negativity, the city of Aberdeen has remained relatively prosperous (see this article: Aberdeen: the city the credit crunch forgot). Although he is fighting to get his $1billon project off the ground, Donald Trump is looking to bring further inward investment into the region.
Bradford – more people have been out-priced of Leeds (which is located 8 miles away) lower living costs has attracted young professionals to the area. Complementing this is a large overhaul and regeneration plan for Bradford as well as expansion of the Leeds-Bradford airport.
Wakefield – the area has seen an upturn in the local economy and areas such as Knottingley, Featherstone, Normanton and Castleford (recently a subject of a Channel 4 documentary) are witnessing major regeneration schemes.
Hemel Hempstead – a new town (built 50 years ago), extensive regeneration is planned for the area including under the Hemel 2020 plan and the area is also easily commutable for London city workers.
Luton – due to it’s close proximity to London and recent regeneration programme, rental demand in the area remains strong – particularly for HMO properties (see the following article on Regeneration Planning in Luton).
Taunton – some 47 hectares of town centre brownfield land development is planned in the next 20 years as this article demonstrates.
Canning Town (East London) – formally standing in the top 5 per cent of deprived parts of the country, the area is undergoing £1.7 billion including creating 500,000 square metres of floor space to revitalise the town centre; community facilities including a large library and health centre and fundamental improvements to schools and colleges.
Other examples include the prospect of train passengers being able to travel from Yorkshire to Paris in three hours with a plan for a new £30 billion high-speed rail line (off-shoots would reach out to major cites in the Midlands and northern England including Birmingham, Manchester and Liverpool). So whilst such growth and regenerative prospects in the UK may not be immediate (and may take longer than originally expected in light of the economic downturn); investors should still take note and look well into the future.
Reference sites:
BBC Local
Up My Street
Financial Times Local
Estates Review
Distance to other cities and major towns – use AA Route Planner to determine the distance. Properties which are further away from towns and cities tend to have lower yields.
Distance to local transport – you may mind find a satellite town which has a good connection to an airport or other transport route enabling people to travel easily. Again use AA Route Planner to determine the distance.
Competition – to investigate your local competition have a look at the local papers and undertake a google search terms such as ‘quick sale <town/city >’ or ’sell and rent back <town/city>.
Employment and Employment Structure – see what is happening within the labour markets and see what area of the employment dominates the workforce (manufacturing, construction, hospitality, transport, communications, finance, IT, public admin, education, health and other services and business activities): this will help you the level of market rent. Generally speaking, rent should account for approximately 1/3 of your tenants take home pay.
Price to Earnings indices – head to the following link on the Average Earnings Ratios for some information.
Supply – the wave of new build development in cities such as Birmingham, Manchester and Liverpool from the early 2000s has bought an over-supply of properties, particularly apartments, in some parts of the country. You should be careful if you are looking at buying these kinds of properties as they are still considered to be over-priced. Call a few local lettings agents and see if the rent would stack comfortably before proceeding.
Social Demographics – ensure your areas house the right kind of tenants to make your local BTL business model work.
Population and Population growth – investigate if the city is or is expecting to be attracting large groups of people (for example from migrant workers). Also, read articles in blogs such as the Optimum Population Growth blog.
Age Structure – If, for example, you are aiming to look for HMOs it would largely be a younger market that you will be aiming for.
Ethnic Makeup – there are certain areas you may find that will be attracting large groups of migrant communities looking for areas to rent and build lives in.
Crime – whilst looking at websites such as Up My Street to monitor rates, you should also looking at public and police reforms that are happening, which may be improving the crime levels (local newspapers and websites are a good source of this kind of information)
Culture / Tourism – when it was announced that Liverpool was to be the new city of culture a flock of investors headed to the North West and subsequent capital appreciation was noticed. Keep an eye out for areas of the country with new infrastructure and points of interest which may improve their attractiveness as an investment destination.
