As a result of the pandemic, the demand for rental property in city centre areas dropped off massively. This was largely prompted by a search for space as people stuck in city centre flats during lockdown moved out to commuter areas. Of course, with many offices being closed and work from home orders in place, the city centre – with its close proximity to their usual workplaces – seemed like a poor choice.
However, we’re starting to return to some form of normal and, as a result, people are trickling back into city centres.
The Return to the City Centre Rental Property.
‘In general,’ says Stuart Marshall of Liquid Expat Mortgages, ‘we started to see a trend towards higher demand for city centre rental property in the months immediately after Easter. Edinburgh saw the highest rise in city-centre rental demand, with growth of 26% from the period before Easter to the period soon after. Leeds also underwent a rental demand growth of 12% in the same period and Manchester saw a 5% rise.’
‘There are a number of reasons that this return to the city is happening. For one, life is slowly returning to some semblance of normal. With that, people are returning to their workplaces for at least some of the week and city-centric social lives are starting to resume too. Cafes, bars, and local stores are all slowly reopening, making city centre living less isolated than it was year ago.”
During the last twelve months, rents have fallen because of the drop in rental demand prompted by the pandemic. For example, according to property portal Zoopla, rents in a city like Manchester – one of the UK’s major hotspots – now sit at around 28% of the average income as opposed to 30% in March 2019. London has seen the most significant drop in the cost of renting, with rents having fallen 9.4% between March 2020 and March 2021. This leaves rents in London at their lowest level in a decade. These rental falls have tempted many renters looking to lock in a bargain whilst moving back to the city centre.’
The Investment Opportunity.
Because of the situation created by the pandemic, there is currently a great opportunity for UK expats and foreign nationals to invest in rental property.
‘You might think that lower rents should discourage you from buying a rental property as an investment’ continues Stuart Marshall. ‘However, while rents are currently lower than we have seen for some time in city-centre areas, they are set to rise again as demand starts to return. We are already starting to see a fall in good quality suitable stock as the uptake of rental property by those moving back into the city has started to have an impact. This means that for UK expat buy-to-let investors and foreign national investors, there are great opportunities to achieve strong rental yields for many years to come and overcome the bumps that might come with property investment as life re-adjusts after the events of the last sixteen months.’
‘And there is a more pervasive reason why rental demand is set to continue. This is to do with the changing lifestyles and opportunities of many individuals in the rental market. House prices are rising – and fast. This means that many first-time buyers looking to graduate from the rental market into home ownership are unable to do so. Instability is discouraging many from taking on a huge financial commitment like a mortgage, so renting is the only option in the short term. Aside from these limitations, there are many renters who are also choosing to stay in the rental market. With people’s lifestyles becoming more fluid, many young people are choosing to stay in the rental market so that they’re not ‘tied down’ if they want to change jobs and move wherever they wish. Further, with renting now cheaper than buying, many are choosing to rent so that they can prioritise their social lives and have more disposable income to devote to life outside of work. These changes in accessibility and choice mean that the time taken for landlords to let their properties has now fallen to a record low.’
All of this means that UK expat and foreign national investors who purchase a rental property in a strong city centre market in the UK stand to have a profitable investment for many years to come.
Properties to Look Out For.
With the cost of houses rising at four times the price of flats, city centre flats present a great prospect for both fledgling and experienced UK expat and foreign national investors. They are far more affordable and stand to deliver strong rental yields with rental demand growing in the way that it is. If purchased in the right area, these properties are also likely to make good capital gains too. According to Savills Property Consultants, areas like Liverpool and Manchester are consistently popular with UK expat and foreign national investors as the Northwest of England is projected to grow by 24% in the next four years. Buying off-plan apartments in city centre areas also offers many options such as buy-to-let, company buy-to-let and so on. ‘It all depends on what your circumstances are and what you are looking to achieve. Certainly, these types of properties are often more affordable, flexible and even offer you the chance to make capital growth before the property is even completed.’
‘The last thing to say is that it’s always worthwhile talking to an expat mortgage specialist before deciding on your investment property. There are many pitfalls to building a portfolio of investment properties. However, if done correctly, you also stand to make big rewards.’
Liquid Expat Mortgages
Unit F2, Waterfold Business Park,
Bury BL9 7BR
Phone: +44 (0) 161 871 1216
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+44 (0) 161 633 5009