Property investors have an increasingly diverse range of opportunities to build a robust portfolio, with a growing number choosing to expand into more specialist types of investment such as HMOs and holiday homes. However, when it comes to building a successful portfolio, the key focus remains the same as it always has been – providing the right type of property tailored to the specific rental demands of the area in which its located. Taking this approach will mean there’s a consistent level of healthy tenant demand, which can help to deliver higher rental yields, better occupancy rates, and even stronger capital appreciation.
In this article, we’ll look in more detail at the nuances of regional property demands, exploring the types of properties in high demand in various UK regions, providing vital insights for your investor clients, based on analysis of ONS data by Property Beacon.
City centres
City centres, characterised by their vibrancy and economic activities, primarily attract young professionals and students. This demographic prefers 1-2 bedroom flats due to their affordability and the convenience they offer.
1. Young professionals: This group seeks proximity to their workplaces, transport links, and urban amenities such as restaurants, gyms, and entertainment venues. They value time efficiency and lifestyle convenience, making smaller flats in well-connected areas highly desirable. Investors can capitalise on this demand by focusing on properties that are either already 1-2 bedroom flats or by converting larger properties into multiple smaller units.
2. Students: The student population is another significant tenant group in city centres. Proximity to universities, libraries, and social hubs is paramount. Purpose-built student accommodations (PBSAs) have been popular, but there is also a strong demand for private rentals that offer a more personal living experience. Investing in or converting properties to HMOs to meet the needs of this demographic can ensure high occupancy rates throughout the academic year.
Optimizing city centre properties:
• Conversion projects: Converting larger properties into multiple smaller units can be lucrative. For instance, a large house or flat can be subdivided into 1-2 bedroom flats to increase rental units and meet demand.
• Modern amenities: Including modern amenities such as high-speed internet, communal areas, and secure bike storage can make properties more appealing to young professionals and students.
Suburbs
Suburban areas are often preferred by families seeking more space, good schools, and a safe community environment. The ideal properties in these regions are typically 2-4 bedroom houses with gardens.
1. Families: Families generally look for homes that provide more space for growing children, including gardens and proximity to parks. The availability of good schools is a critical factor driving the demand for family-sized homes in suburban areas. Properties with extra rooms that can serve as home offices are increasingly desirable due to the rise of remote working.
2. Long-term tenancies: Families often seek long-term rentals to provide stability for their children’s education. This preference can result in reduced turnover rates and steady rental income for investors.
Optimizing Suburban Properties:
• Extensions and refurbishments: Adding extensions or refurbishing existing spaces to create larger living areas can significantly enhance the property’s appeal. This might include converting attics or basements into additional bedrooms or living spaces.
• Family-friendly features: Ensuring properties have family-friendly features such as secure gardens, ample storage, and proximity to schools can make them more attractive to long-term tenants.
Regional Nuance
Different regions within the UK have unique demands based on local economic conditions, cultural factors, and demographic trends.
1. London and South East: The demand for rental properties in London remains robust due to its status as an economic hub. High property prices mean that many young professionals and expatriates prefer renting. The South East, with its good transport links to London, also sees high demand for rental properties, particularly from commuters.
2. Midlands and the North: These regions have seen significant regeneration efforts, attracting young professionals and families alike. Cities such as Manchester, Birmingham, and Leeds offer more affordable living costs compared to London, driving demand for both city centre flats and suburban family homes.
3.Scotland and Wales: The property market in Scotland and Wales is marked by a growing demand for both urban and rural properties. Edinburgh and Glasgow, for instance, attract students and young professionals, while the scenic countryside appeals to families and retirees.
Best properties for resale and yield
When considering future resale value and rental yield, investors should consider the following property types:
1. Semi-detached 3-bedroom properties: These are a sound investment choice due to their broad appeal. They attract first-time homebuyers, families, and even downsizers. Additionally, these properties offer opportunities for value addition through extensions and refurbishments, enhancing both rental income and resale value.
2. 1-2 bedroom flats: These properties generally offer the best rental yields due to their lower purchase price relative to rental income. They are particularly attractive in city centres where demand from young professionals and students is high.
Conclusion
Investing in properties that align with the specific demands of regional markets can significantly enhance rental income and the potential for capital appreciation. In city centres, focusing on 1-2 bedroom flats can attract young professionals and students, ensuring high occupancy rates. In suburban areas, prioritizing 2-4 bedroom houses caters to families seeking long-term rentals. For a balance of resale value and rental yield, semi-detached 3-bedroom properties are a wise investment. By understanding and responding to regional tenant profiles, investors can optimize their portfolios for maximum returns.
The ideal property for a specific area may not be available for investors to purchase or, if it is, may come at a premium. Investors can help to create more property to meet a region’s individual demands by purchasing existing property and converting it, which will often be possible under Permitted Development Rights (PDR). Bridging finance can help investors to realise this potential by helping to fund both the purchase and the cost of any works required.