Published: 01/02/2022
Choosing where to invest in property can be tricky, especially when considering the whole of the U.K. There’s no doubt, however, that in terms of return on investment, Leeds is the number one choice for all budding property investors. Dwell’s investor services are designed to help investors navigate Leeds’ local market and offer unparalleled knowledge and expertise.
So, why exactly is Leeds one of the best cities in the U.K. for property investment? With strong economical potential and plenty of regeneration projects currently active, over the next few years house prices and the rental market are expected to grow as the city develops into a vibrant, thriving hotspot.
Supported by an ever-growing student population as more and more young people attend the award-winning universities (and then, following that, the influx of young professionals), Leeds is an up-and-coming city with lots to offer for millennials and Gen-Z’s. So, that means there'll be more and more of a demand for property rentals, moving forward.
So, why exactly is Leeds one of the best cities in the U.K. for property investment? With strong economical potential and plenty of regeneration projects currently active, over the next few years house prices and the rental market are expected to grow as the city develops into a vibrant, thriving hotspot.
Supported by an ever-growing student population as more and more young people attend the award-winning universities (and then, following that, the influx of young professionals), Leeds is an up-and-coming city with lots to offer for millennials and Gen-Z’s. So, that means there'll be more and more of a demand for property rentals, moving forward.
Is Leeds a Good Place to Invest in Property Over Other Cities?
As the UK’s fastest growing city, it’s the perfect time to invest in property in Leeds. It’s ideal for buy-to-let investors as it has one of the highest potential yields in the whole of the UK, an average of 8.7% compared to 3.05% in London. This means investors can see more return on investment in Leeds than they would if renting out a property in London.As a city, Leeds is incredibly popular with young people and especially students. In fact, over 60% of rentals within Leeds over the past twelve months have been let to tenants aged between 18 and 29. As such, there’ll always be demand for property, which means you’ll have no trouble finding a tenant. With the average age of a person purchasing their own property now at 33.1 and rising, that means that the market for rentals is stronger than ever.
As of June 2022, we know from Data Loft that the average house price for a property in Leeds saw a decrease in terms of annual percentage change, with a figure sitting at -1.52% compared with the past 12 months. This isn’t necessarily indicative of a ‘burst bubble’, however. It’s probably more simply down to the fact that 2021 had an exponential housing boom, seeing the fastest price growth rates in 15 years, and such drastic growth cannot be sustained in perpetuity.
What’s more, demand is increasing as more and more people move into the city, which is only a good thing for the rental market as increased demand equals increased rental prices, thus making your investment more profitable overall. So, even though property prices might have stabilised somewhat, you can still look to make a tidy profit from a buy-to-let rental portfolio.
How Affordable is Leeds in Comparison with the Rest of the UK?
As one of the UK’s largest cities, Leeds is surprisingly cheap considering the lifestyle and average salary of its inhabitants. On average, the cost of living in Leeds is 36% cheaper than London, which is a massive saving for those paying their mortgage or renting.
In Leeds, as of June of this year, the average house price (for all property types) was £207,287.
In Leeds, as of June of this year, the average house price (for all property types) was £207,287.
The average price for a semi-detached property (which are typically the most popular on the market) was £232,476, whilst for flats, terraced properties and fully detached properties, those figures were £133,283, £168,206 and £406,218, respectively.
By comparison, if you look at London, then you see that the average cost for a semi-detached property (as of May this year) was a staggering £688,058 – that’s an almost 200% increase. It’s worth remembering, of course, London certainly isn’t representative of the entire UK, so how much would the same property cost in different parts of the country?
The average cost for a semi-detached house in Plymouth , again, according to the UK House Price Index, and as of May this year, is £251,692.
Using that same semi-detached filter for Chelmsford, in Essex , that average figure is £411,953.
And to buy a similarly-structured property in Wales with roughly the same attributes, you would have to spend on average £205,508.
Of the above, only semi-detached properties in Wales have a lower average cost, however given what an attractive and up-and-coming city Leeds is, a little more to pay for such opportunity and appeal seems a minor trade-off.
This is why at Dwell we are of the belief that Leeds is the best place to buy in the UK in terms of value for money. But what about other factors such as job opportunities, entertainment and travel?
This is why at Dwell we are of the belief that Leeds is the best place to buy in the UK in terms of value for money. But what about other factors such as job opportunities, entertainment and travel?
Factors to Consider Before Investing
Before investing in a buy-to-let property, it’s important to know who might want to live in the property you buy, which depends on what type of property it is, as well as where exactly it’s situated.
Reasons people might be looking to live in the city of Leeds include:
Reasons people might be looking to live in the city of Leeds include:
- Travel links
- Entertainment venues
- Restaurant
- Bars
- Clubs/hobbies
- Work
Travel
In terms of travelling around the city, Leeds is different from others as it is the largest city in Europe without any form of underground system or light railway. However, Leeds city centre is extremely well-connected and, in fact, Leeds Station is one of the busiest in Britain. It has close links to the city suburbs as well as lines running to all other cities in the U.K.
Benefiting those in the city centre, Leeds has a free bus scheme called Zero Fare Free City Bus which runs on a circular route in the centre of Leeds. Buses also run outside of the city centre and into the suburbs as an alternative means of travel.
Restaurants
Rated number one on Tripadvisor, La Taberna might be one reason to be tempted to move to the city centre, with its delicious homemade Spanish food and tapas, this restaurant offers the perfect meal to nibble while catching up with friends or family.
The city is also home to many popular chain restaurants such as Gauchos, Bills, Turtle Bay and many more, as well as independent venues that offer a wide variety of cuisines.
The city is also home to many popular chain restaurants such as Gauchos, Bills, Turtle Bay and many more, as well as independent venues that offer a wide variety of cuisines.
In Leeds, you can dine out to eat various cuisines from around the globe, including:
- Japanese
- Greek
- Indian
- Italian
- Argentinian
- British
Restaurants and other hospitality venues are continuing to open as the city develops further, only increasing the appeal of Leeds as a place to live.
Bars
Similarly to restaurants, you can choose from your favourite well-known spots such as Dirty Martini or The Alchemist, or alternatively, you can try an independent bar where you might find a speciality cocktail or two.
Cuckoo has a reputation in the city as a quirky, ‘out-there’ venue with colourful rainbows and animal heads plastered over the walls. This place comes alive at night and is the perfect spot for young professionals and students to let their hair down on a Friday night.
Cuckoo has a reputation in the city as a quirky, ‘out-there’ venue with colourful rainbows and animal heads plastered over the walls. This place comes alive at night and is the perfect spot for young professionals and students to let their hair down on a Friday night.
For a more “rock ‘n roll” vibe, Mojo often hosts live bands and specialises in rum cocktails. The perfect alternative party place for newcomers to the city to explore.
Will House Prices Rise or Fall in Leeds, Moving Forward?
As touched upon, house prices rose at a meteoric rate in 2021, and Leeds was no exception to this. That growth seems to have plateaued in 2022, however with a huge regeneration scheme planned for the years ahead, it’s not unreasonable to surmise that prices will maintain (or even climb once more) in the short-to-medium term.
South Bank Leeds is a development that will double the size of Leeds city centre, a 253 hectare space the size of 350 football fields, which is being transformed into a space for learning, creativity and leisure. This will create 8,000 homes and 35,000 new jobs once finished, increasing demand for rental properties as a result.
The High Speed Rail 2 (HS2) is also being built, which will offer better connections to the north, midlands and south of the U.K. This station is expected to welcome more travellers than Gatwick Airport, and encourage a growth of 143% in city size.
South Bank Leeds is a development that will double the size of Leeds city centre, a 253 hectare space the size of 350 football fields, which is being transformed into a space for learning, creativity and leisure. This will create 8,000 homes and 35,000 new jobs once finished, increasing demand for rental properties as a result.
The High Speed Rail 2 (HS2) is also being built, which will offer better connections to the north, midlands and south of the U.K. This station is expected to welcome more travellers than Gatwick Airport, and encourage a growth of 143% in city size.
What Type of Properties are Best to Invest in Leeds?
Ultimately, the best type of property to invest in comes down to profit, but there are other factors such as what kind of tenants you desire and for what purpose you are making the investment.
HMO
If you’d like to aim for the highest ROI, many investors opt for an HMO, or a House In Multiple Occupation, which can be extremely lucrative. In Leeds there are many thousands of HMO’s for both students and professionals and each type represents a strong market in the city.
However, these properties often require a lot of maintenance and frequent change of tenancy contributing to additional costs. But whilst these properties might pose landlords more questions than most, there’s no doubt that there’s strong tenant demand for them.
However, these properties often require a lot of maintenance and frequent change of tenancy contributing to additional costs. But whilst these properties might pose landlords more questions than most, there’s no doubt that there’s strong tenant demand for them.
Suburban Properties
If you would like to have steady, long term tenants then investing in a family home in the suburbs would be a wise choice. Though the upfront costs of the property might be more expensive, the security of having a long term tenancy in place will be sure to make you a good return on investment, and may even develop a relationship between yourself and the tenant.
Maintenance on these homes might not be so costly, especially if it is a new build property, which reduces additional yearly spend and makes for a good yield.
There is a shortage of larger family homes to rent and the pandemic has led to increased demand for larger homes with a garden, and as a consequence these types of homes have appreciated more than any other in terms of capital growth and rent recently.
Maintenance on these homes might not be so costly, especially if it is a new build property, which reduces additional yearly spend and makes for a good yield.
There is a shortage of larger family homes to rent and the pandemic has led to increased demand for larger homes with a garden, and as a consequence these types of homes have appreciated more than any other in terms of capital growth and rent recently.
City Centre Apartments
City centre apartments are also well worth considering as long term investments. They are always in demand, particularly with young people seeking the sheer convenience and flexibility they offer for modern living. Maintenance costs are usually very low making for a very low hassle investment.
Eventually, when it comes to selling the property, you will reap the rewards of your investment and you can expect to benefit from capital appreciation, particularly over the long term. House prices are expected to continue to rise and they’ll keep doing so whilst demand outweighs supply.
Eventually, when it comes to selling the property, you will reap the rewards of your investment and you can expect to benefit from capital appreciation, particularly over the long term. House prices are expected to continue to rise and they’ll keep doing so whilst demand outweighs supply.
What are the Best Parts of Leeds to Invest in?
If you plan to rent your property out to students, then purchasing a 3-4 bedroom house to the north of the city, in Headingley, could be a great option. Close to the Leeds Beckett University campus, this town is considered to be the centre of Leeds’ student population, and there will always be a heavy flow of tenants looking to rent student properties within this area.
Here you can find a property for an average of £242,225 and expect to achieve a yield of 7.4%.
Young Professionals and Families
If young professionals or families are your target market, then it might be wise to invest in a property in a north Leeds suburb such as Roundhay, Moortown Adel or Horsforth which are considered to be some of the best places to live in Leeds outside of the city centre.
Those who live in this area will be able to access Leeds city centre in just 9 minutes by train, as well as be in the catchment area for highly commended grammar schools.
Those who live in this area will be able to access Leeds city centre in just 9 minutes by train, as well as be in the catchment area for highly commended grammar schools.
In an area like Horsforth, a property is likely to cost £285,946 on average, and achieve a yield of 4-6%.
City Centre
In the city centre there are a mixture of people who want to be close to university or their work, but all are looking for the same inner-city lifestyle. With plenty of converted warehouse and loft-style apartments, and lots of high-rise buildings in the pipeline, the city could be transformed in the coming years, so it’s a great time to invest.
A property in the city centre can sell for an average of £208,267, and investors can expect a yield of around 5-6%.
How Much Rental Income Can Buy-to-Let Investors Expect?
Leeds was named the third most profitable city to be a landlord in, after Brighton and London. Despite being third, It’s far cheaper to purchase a property in Leeds than the preceding two cities, which means you could become a landlord and start making a return on your investment sooner than you might think.
The average cost of renting a property in Leeds (across all property types) is £745. In Leeds, landlords will make an average monthly profit of £432.29, which is an impressive number considering the low house prices, even in the city centre. And landlords don’t even have to take on all of their usual workload, either, if they enlist the help of a property management company.
And these numbers are only set to increase over the coming years as Leeds continues to grow. Demand for residential properties (whether rental or bought outright) is steadily increasing as more businesses move in and with the planned developments for the city centre coming to fruition, prices will only inflate further.
And these numbers are only set to increase over the coming years as Leeds continues to grow. Demand for residential properties (whether rental or bought outright) is steadily increasing as more businesses move in and with the planned developments for the city centre coming to fruition, prices will only inflate further.
Final Thoughts
The best time to invest is while prices are still low but statistics are suggesting that this won’t last long. If you are considering purchasing a buy-to-let property in Leeds then don’t delay, invest your money now to maximise earnings and who knows where the future figures will take you.
