Snakes and Property Ladders: Is Affordable Housing The Best Option?

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Snakes and Ladders

Property investment in the UK can be expensive to increase capital quickly, especially in the current economic climate. But, it may be an excellent long-term investment, especially when you consider buying in areas of affordable housing.

According to the Office of National Statistics, the average price of a property in the UK in November 2022 was £294,910, which is a 10.3% price increase from November 2021 but a 0.3% decrease from the month before.

Although the average house price has increased in the United Kingdom since 2021, the annual house price rise has begun to show signs of slowing.

The current market could become a cautionary tale for many potential or existing property investors looking for properties to extend their portfolios.

Some investors who prioritise purchasing affordable housing in up-and-coming areas and use the latest market trends may benefit significantly from the slowing market as they look forward to the future.

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Where Are The Most Affordable Houses In The UK?

In the United Kingdom, the general trend across all regions is that you will be able to gain more for your buck in the North East of England, Scotland and Wales as house prices fall 2.6%, 1.2% and 1.6%, respectively. On the other hand, Northern Ireland had a monthly increase of 4.2% in Q3 of 2022.

All data accurate from January 2023, collected from Rightmove, Numbeo, LivingCost & Zoopla.

The Most Affordable Places To Live In England

According to Zoopla, the most affordable towns in England are Middlesborough, Bradford, Sunderland, Grimsby and Shildon. Although the areas suffer from high crime rates or poor education opportunities, they are all up-and-coming; there are massive development plans for the next 10 years.

If you are looking to rent a property, or you are, in fact, the renter, the following areas are the most affordable in England in 2023.

Place

Average House Price (January 2023)

Average Cost To Live (pcm, per person)

Median Salary (pcm)

Average Rental Price (pcm)

Middlesborough £144,406 £559.20 £2,250 £708
Bradford £183,190 £577.60 £3,125 £761
Sunderland £157,344 £503.28 £2,666 £545
Grimsby £144,090 £830 £2,250 £579
Shildon £84,836 £643.08 £2,489 £437

The Highest Yielding Affordable Towns England

If you are already an investor or looking to start building a portfolio, it can be greatly beneficial to focus on areas of higher-yielding markets. The rental yield of a property may help you measure the potential rental income against the cost of the property.

If you are an investor, understanding the potential yields for a town is crucial in deciding where you choose to invest.

 Place Average House Price (January 2023)  Average Rental Price (pcm)Average Potential Yields
 Burnley £145,008 £493 4.08%
 Hartlepool £144,874 £484 4.01%
 Middlesborough £144,406 £708 5.83%
 Sunderland £157,344 £545 4.15%
 Grimsby £144,090 £579 4.82%

The Highest Yielding Large Cities In England

Unlike the most affordable towns in England, another option for many property investors is to buy-to-let in large cities like Manchester and London. Although the properties may cost significantly more as an initial investment, on the whole, the average potential yield is higher than that of affordable towns.

Affordable housing is still an option in major cities, but they are usually found within inner city areas.

Place Average House Price Average Rental Price (pcm) Average Potential Yields
Manchester£284,922 £1,053 4.43%
London£743,741 £2,011 3.24%
Bristol£383,148 £1,400 4.38%
Cambridge£545,677 £2,492 5.48%
Peterborough£241,808 £1,160 5.76%

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Should You Invest In Major Cities Or Affordable Towns?

If you are open to investing in different regions of the UK, deciding whether you should invest in a significant city like Peterborough or affordable housing in a town like Middlesborough can often come down to risk. You should ask yourself what your risk tolerance and goals are.

The general rule of thumb is that property investing in a major city may offer more growth opportunities, but it can carry higher risk.

The highest yield in England, based on figures from January 2023, indicates that Peterborough will produce 5.76% yields on average, but there is an upfront investment of £241,808 — almost £100,000 more than that of Middlesbrough.

On the other hand, investing in affordable towns can be a safer option, but it may have a slightly lower return on investment.

The highest yield after Middlesborough is Grimsby, with an average potential yield of 4.82%, which is 0.94% less than that of Peterborough, but the smaller investment of £144,090 may seem attractive to first-time investors.

In contrast to the general rule, the highest yield in affordable towns in England, based on the figures above, indicates that Middlesborough will produce a higher yield than Peterborough and be a cheaper upfront investment.

Despite the data representing an entire town or city as a whole and not individual areas, it shows the general trend of rental yields within the United Kingdom.

Currently, the average UK rental yield is at 4.78%, which is considerably lower than the golden 7% rental yield that is considered an excellent yield for buy-to-lets.

Regarding the highest current yielding postcodes and most affordable housing, BD1 in Bradford will provide you with a potential yield of 9.08%, M14 in Manchester with 9.31%, NE5 in Newcastle with 7.22% and NG7 in Nottingham with 9.24%.

Where Can We Expect The Rental Market To Go In The Next Year?

On the whole, the rental market is likely to stay strong over the next year, as there is an ongoing demand by tenants for rental properties. But, this does not mean that the market will be smooth sailing.

We asked Jonny Christie, Chief Executive Officer of The Property Sourcing Company, for his insight into what we can expect from the rental market over the next year:

    Jonny said, “I expect rents to increase in the next 12 months due to inflationary pressures and rising interest rates.”

    “Many borrowers have seen their variable rate mortgages increase in line with interest rates, thus increasing their cost of borrowing, and this will mean that landlords will pass these rising costs on to tenants through rent increases.”

    “We will also see many landlords trying to dispose of assets, and many section notices will be served if they feel that their rental property is not producing a sufficient return to make it profitable.”

    “This could contract the number of houses available to let, which could create a lack of supply if other landlords do not pick up these assets.

    “All in all, the rental market is looking bleak for tenants, and landlords are facing rising costs.”

    “The only plus side is there may be more properties coming to the market that may be suitable for purchase as a buy-to-let, and the prices of these properties may become more competitive; thus, there may be some bargain to be had!

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Tom is a Digital Content Writer passionate about sustainable property & property trends. Regardless of the subject, he will always write blogs of the best calibre. Read more about Tom here.

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About Tom Condon 126 Articles
Tom is a Digital Content Writer passionate about sustainable property & property trends. Regardless of the subject, he will always write blogs of the best calibre. Read more about Tom here.

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