Wednesday, 29 May 2024

Investing in the Real Estate Market in the United Kingdom

Globally, real estate markets are very diverse in terms of risks and returns. You can have sky-high returns in emerging markets, but for a more stable investment, it is better to put your money on countries with more stable and mature economies. One example is the UK property market.

The UK property market offers high average yields of about 5.31 percent as of May 2020, outperforming other major European nations and establishing itself as a destination for investors. Let’s take a look at a few cities that yields stable and good returns in the UK.

Cities in the UK That Are Good For Property Investment

#1: London

This goes without saying. London, being the UK’s capital city, is a popular investment location, owing to the strong demand for homes and rental properties. With an average rental return of approximately 2.83 percent, buy-to-let homes are a popular investment choice in London. As of December 2020, the average residential property price in London is £666,160, considerably more than in other parts of the UK and with a 5-year capital growth rate of 12.7 percent.

#2: Liverpool

Liverpool is also a popular investment choice for investors, owing to its comparatively cheap property costs, which make it one of the most inexpensive cities in the United Kingdom for real estate investment. Liverpool’s average property price is £182,913, making it an attractive option for property investors seeking a low-cost investment with a reasonable rental return of around 5.48 percent. Additionally, Liverpool has a high rate of capital growth, with prices increasing by 15.1% since 2019, providing attractive returns for real estate investors.

#3: Birmingham

Birmingham is also an excellent investment location, especially for buy-to-sell investors, owing to the region’s strong capital growth rates. Birmingham, which is located in the United Kingdom’s West Midlands region, is projected to have a 21.7 percent increase in home prices over the next five years, according to Savills.

This is consistent with the city’s history of rapid capital development, with home prices increasing by 31.67 percent over the last decade. Birmingham’s high rate of capital growth makes it an appealing location for investors in the United Kingdom seeking capital appreciation returns.

Property Types to Invest in the United Kingdom

There are many methods to invest in property in the United Kingdom. Investors that invest in buy-to-let homes do so with the aim of leasing the property to tenants. This enables the investor to earn a profit from the property via rental revenue, as well as possibly profit from capital growth due to the property’s increase in value.

This is a profitable investment strategy since it provides several streams of income, which makes it popular with investors. Investors generally keep buy-to-let homes for a longer period of time than they do buy-to-sell properties in order to earn more rental income passively.

On the other side, buy-to-sell homes earn profits primarily via property value appreciation. This is sometimes referred to as property flipping, and it involves an investor purchasing a home that is usually in need of repairs or is in bad shape.

Another approach is property development, in which investors assume the role of a developer and acquire land or property with the intention of developing it for sale.

Finally, investors may invest in UK real estate through Real Estate Investment Trusts (REITs) (REITs). REITs are businesses that own, manage, and operate income-producing real estate. Investors in REITs indirectly participate in these properties and get returns on their investment via dividends paid out by the REITs at predetermined intervals, which vary per REIT.

If you want to know find out more about investments in the UK market, make a visit to Real Vantage at today!