Finding property hotspots is a bit like doing your grocery shopping. You need to source all the right ingredients to make something tasty.
Reliable transport links, good shops and amenities, plentiful employment opportunities, strong rental demand and affordable prices are all good ingredients for future growth. We call these the fundamentals, and they are a vital part of your success as an investor.
You have to get your timing right too: leave it too late to do your shopping and you risk missing out on the best deals. The idea is to get in early and enjoy being part of the growth. If you can identify areas of opportunity before the rest of the market, then you’ll put yourself ahead of the pack.
To help you get a head start we’re sharing our list of the best places to invest in property in 2023. These are the areas we’ll be targeting over the next 12 months for our own personal investments and for our Property Hub Invest clients.
Derby featured as one of our up-and-coming locations last year, and wow, what an up and comer it was. According to Hometrack, property prices rose by a phenomenal 9% in 2022.
In hindsight, we probably got it wrong to call it an up and comer last year because it performed so well, and it’s not hard to see why. Employment rates are high and there’s a lot of great employers based in the city like Rolls Royce and Bombardier, which means the average wage in Derby is in the top ten in the whole of the UK. Yet property prices are still very affordable compared to wages – it has the cheapest property prices in our sure things list – which means it’s ripe for growth.
One of the other things we like about Derby is the complete undersupply of new property on the market and coming to market. There just isn’t enough good quality stock to go around, so there’s a real opportunity for those investing there this year.
We think this year will be another brilliant year for Derby.
Just down the road from Derby is Nottingham. The city has held its place at the top of our list for another year running.
Prices grew by 10.9% there last year, the highest growth of any city in the UK. You might think it has had its growth by now and it’s time for things to ease off a bit, but Nottingham has so much going for it we think there’s plenty more upside to come.
It’s hard to think of many places better than Nottingham to invest for the long term. Like Derby, it doesn’t have a great deal of supply. There’s been more new schemes in the last couple of years than there has been for the past 10 years or so, but still not a lot compared to demand, which is growing and growing.
Rents in Nottingham are still super attractive and growing fast, and if you look at the average house price – which according to Hometrack is £198,000 – that’s cheaper than you’ll find in most comparable cities despite having so much going for it.
Leeds is a consistent performer and, as such, has made it into our hotspots list once again this year. It may not seem as exciting as some of the other areas on this list, but you don’t always need to have excitement when it comes to property investment.
Even though it has performed strongly over the past few years there’s still plenty of opportunity and upside in Leeds. Loads of investment is being poured into the city and economically it is one of the strongest in the UK.
It is very much an affluent city, lots of big finance companies and headquarters are based there. Of course, all cities have their not-so-nice areas, but overall Leeds is a fundamentals hotspot. It has everything you could want as an investor. A strong rail and road infrastructure, good employment, great universities and much more.
If you want a safe bet, Leeds could be a location for you this year.
Manchester & Greater Manchester
Somewhere else we’ve featured plenty of times before is Manchester and the wider metropolitan area of Greater Manchester. We’re mentioning both of them because they are each great places to invest, but they have different characteristics.
Manchester city centre is interesting because supply of properties in the city centre has rocketed over recent years, but demand to rent in the city centre has outpaced this supply resulting in a red-hot rental market.
Manchester-based property management company Urban Bubble found there were just 360 properties available to rent in the city in the third quarter of last year, the lowest number on record. As a result, average rents have shot up by around 20%, rising by a whopping 38% in some areas.
Property prices aren’t as cheap as they once were, but we think they are still way off their peak. Manchester is transforming into a super city. It may not be London, but it is one of, if not the strongest city in England after the capital. Every year its progress seems to accelerate even further. It’s no wonder there’s a chronic undersupply of rental stock because so many people are gravitating to the area, it’s a magnet for talent. Lots of people are relocating there from across the UK. All this makes Manchester city centre an incredibly exciting place to invest.
As we’ve said, it’s not just the city centre that has made it on to our list, we love Greater Manchester too. Not everyone can afford to invest in Manchester city centre, but you can still tap into all that growth, job creation and everything else that’s happening in the city centre and rippling out, helped by the fact the transport network is so good.
The whole of Greater Manchester is performing strongly at the moment and will continue to do so. Investing in the suburbs gives you a different way to play the market than you would in the city. In the city you’re less likely to be able to do much in the way of refurbs and are more likely to be letting to young professionals or students than you are a family.
Buying in Greater Manchester gives you access to different strategies, different price points and different tenant types while still benefiting from the strength of the Manchester economy. For that reason, both Manchester and Greater Manchester make it onto our list.
Liverpool – specifically the city centre – just about held on to its position in our list this year because it is a bit of a mixed bag.
There’s no doubt Liverpool will perform very strongly again this year. In terms of its fundamentals and its potential as a market it is super strong. It has great affordability, amazing infrastructure, an incredible amount of investment going into the city, great universities… the list goes on and on.
The city has so much going for it, but if you’re planning to invest there you need to be careful: there are lots of new developments being started and not finished leaving investors out of pocket.
For the time being it may be safer just to source your own stock. If you stay within the parameters of the city centre itself, then you’ll probably do fine, but if you’re venturing further afield you really need to get to know the areas well and do your due diligence.
Newcastle has leapfrogged its way up the list this year to take its spot among our up-and-commers.
Like the other cities we’ve covered so far, Newcastle has plenty going for it. It has good universities, a broad mix of employment opportunities and the transport infrastructure is pretty reliable, but it has – up until now – been held back by low rental yields.
According to Hometrack, the average price of a property in the city is £147,000, lower than anywhere else in our list. Rents, on the other hand, average at £961 per month – which is below the UK average. This is great for people looking for somewhere to rent, but not so great if you’re an investor. Because rents are so low, you don’t get rewarded as much as you should for getting in early.
Although rents are still low, they are rising, and institutional investors are starting to see something in the city. The insurer Legal & General – a big player in the build-to-rent sector – has just announced a new £60m development it is funding in the city, made up of two residential towers with 300 apartments, which is not something you typically see in Newcastle.
The fact these big institutions – with their big teams of smart people doing their research – are starting to pay attention implies there’s something there that you might be able to piggyback on. So that’s why Newcastle has earned its place here.
Belfast is back on our list again this year, and for good reason. Last year it had a solid year of growth, with prices rising by around 8%, putting it in the mid table. But the figure that’s most eye-catching is that prices are still 22% lower than they were at their peak in 2008, which is absolutely crazy.
There are only two places in the whole of the UK where prices are still lower than they were in 2008: Belfast and Aberdeen, and Aberdeen is a bit of an anomaly because property prices there are influenced by oil prices.
Just because prices are 22% lower doesn’t mean they will grow by this amount this year, but the yields are good and the fundamentals are brilliant, so we are excited about its potential.
We’re not on the verge of making any moves just yet, but it has had our attention for a while, and we’ll continue to keep it on our radar this year. So, if you want to go off the safe list, maybe Belfast is the one for you.
A new entry for 2023, Cardiff also placed mid-table last year in Hometrack’s UK cities house price index, like its fellow up-and-comer Belfast. There’s been a lot of development and investment into the city over the past few years and that’s set to continue.
A growing number of employers are basing themselves there and expanding their businesses, creating more job opportunities and attracting more people to move to the city. In much the same way as Manchester has done in England, Cardiff has become a magnet for talent in Wales. The population is expected to grow by 20% over the next 12 years – the highest rate of increase in the UK.
Perhaps the best indicator of its future potential though is the fact Legal & General has invested over £1bn in build-to-rent projects there. So, if your strategy is to ride on the coattails of the big institutional investors, then Cardiff could be for you.
Of all the areas in this list London has by far the strongest fundamentals. It is an absolute economic powerhouse, a world-famous city, so you’re probably wondering why it’s way down here at the bottom of the list in the same place it was last year.
That’s because we believe all the other areas we’ve mentioned will perform better over the course of the next 12 months. Last year, Derby, Nottingham and Manchester did twice as well in terms of price growth than the capital.
You can almost certainly do better by going elsewhere on our list. Having said that, London is still really interesting because of all the fundamentals it has and the fact that property prices have been subdued when compared to the rest of the UK for many years now. It’s certainly one to watch.
The final city on our list is another new entry for 2023. At first glance you might think it’s a strange choice for this category. Why would you need to be brave to invest in Glasgow? It’s a great city and both prices and rents are rising. It hasn’t exploded in the same way as Edinburgh, but there’s still plenty of upside to be found.
The answer is unfortunately to do with politics. The Scottish government has been very unfriendly towards landlords for a long time, but last year they took it up a notch by introducing rent freezes and eviction bans. You can find out more about the situation by watching our YouTube video on the subject.
So, although the pure property investment case in Glasgow is very strong, you would need to be brave to go into that market today because it’s unfriendly place for landlords to be right now and there’s no sign of that changing anytime soon. But if you’re comfortable with the political risk, Glasgow could be a great investment.
A note on our 2023 property hotspots
Firstly, don’t take our words as gospel.
While we recommend these areas from thorough research and will be focusing our own investment efforts here and sourcing deals for clients in these locations, that doesn’t mean they’re the right places for you.
We recommend that you do your own thorough due diligence before committing to any investment. You could start by taking this free Property Hub University course on how to spot the next property hotspot.
If you’re not 100% confident in investing by yourself and you’d like some further guidance, working with a property investment company may be beneficial and help you along on your journey. But make sure you look into any company before working with them.
And finally, if this article and all the additional resources weren’t enough for you, check out our 2023 hotspots video over on our YouTube channel.
If you’d like to speak to someone about growing your property portfolio in 2023, why not book a free strategy meeting with our Property Hub Invest team by clicking here.