Changes caused by the pandemic
Being confined to four walls, months on end, has led people to reassess their living environment in order to meet their personal and professional needs. Even when offices do re-open, many will opt to carry on working from home as they have already integrated a workspace area. JLL surveyed 3,000 employees and found that going forward, the majority of people will favour flexible working, incorporating both remote and in-office working. This demonstrates the long-term trend of working from home and indicates the demand for property which meet these requirements of additional space.
As a result, the demand for larger properties has soared amid the pandemic. Rightmove conducted a survey on more than 4,000 homeowners and tenants and reported a trend of people desiring bigger properties with a garden and office. In July, sales grew 21.2 % for larger homes, compared to only 2.3% for smaller homes. This figure highlights how homeowners and tenants are inclined to make lifestyle choices to support their adapted working lifestyle and positions a two-bed property as an appealing investment, and a far better option than a one-bed as it meets the demand for space in the current market.
An important factor when considering which type of property to invest in, is based on how much you’ll earn from that property. In Q1 of 2020, Howsy reported a two-bedroom property generated the highest average rental yields in the UK for buy to let investment than any other property type. It also seems that investing up north maximises rental yields in comparison to the more southern regions. This is a major advantage for property investors looking to maximise profitability from their investment.
As a result of changing home needs, research has shown 1 in 7 Londoners want to leave the city, as buyers are increasingly willing to exchange location for space. Factors aforementioned above, including additional space designated for work and proximity to green spaces, have become fundamental in the home and have significantly influenced people to move out of the capital.
Look to the North
Even though larger properties are in demand, affordability still reigns in the property market.
As people are increasingly seeking bigger properties, financial restraints stand in the way for some. However, different areas of the country offer better value properties, where buyers can essentially get more for their money. Regionally, the north of England offers more affordable properties and has seen a surge in demand in recent months. In November, the North West of England witnessed the highest demand in new tenants, with double the number of new prospective tenants compared to London. This pinpoints Manchester as one of the best areas for property investment, with a growing population of students and a large number of young people relocating to the city.
Combined with tenant demand, Manchester offers a very appealing rental market for investors based on affordable property prices, rental returns and long-term house price growth.
In terms of property prices, Manchester boasts below average house prices, of just £177, 796 compared to London’s average property price of £490, 936. The extortionate price differences across the UK regions raise awareness of the importance of location in maximising profitability. This exemplifies the widening of the rental market to areas in the North West region and positions the area as an attractive hotspot for property investors.
Alongside the growing demand and the attractive affordability, the North West region is home to the highest rental yields and capital appreciation in UK. JLL reports Manchester is forecast in the next 5 years to have the highest rental growth in the UK, largely thanks to its thriving economy and growing youthful population. Savills research support this trend in their 5-year house price forecast, and predict a 24.1% growth in the North West, compared to a 12.7% increase in London. Manchester, a city known as the ‘second city’, seems to land on top and beat the competition of London in terms of market demand and highest returns.
Based on tenants’ evolving needs in today’s climate, property investors need to consider property size, accessibility to green spaces, and location in order to achieve the highest rate of returns and capital appreciation. At Alesco, we have recently launched Wardour Point, an exquisite development designed to ensure maximal profitability. It is situated in the heart of Manchester, featuring two-bed apartments, with an onsite-gym, communal gardens and a concierge. To find out more, contact our team today – 0203 819 7366.