The UK property market has enduring appeal for foreign investors, but certain areas have come to the fore in recent years with Liverpool and Manchester catching up with the capital.
The major cities of the UK hold particular appeal for investors from overseas, due to their strongly performing housing markets. London has always been the predominant choice for such buyers, particularly prime central London (PCL).
Yet more affordable cities such as Liverpool and Manchester in the north west have arguably experienced even greater growth in their property markets in recent years, making them an increasingly popular choice. These locations also benefit from strong tenant demand, meaning stronger rental yields for investors.
Liverpool and Manchester also attract many thousands of students each year both from the UK and overseas, due to their top-class universities, and many graduates choose to stay on in these cities and take advantage of their expanding jobs markets.
According to one recent report from Al Rayan Bank, which looks specifically at investors from GCC countries, 89% of investors from Saudi Arabia, Qatar and the UAE view the UK property market as a “priority” for investment. What’s more, investor confidence has increased among 85% of respondents over the past year.
Manchester, Liverpool and Birmingham set for growth
It comes as no surprise that Al Rayan Bank’s survey revealed that the largest proportion – 56% – of property investors are primarily targeting London for investment opportunities. Being the economic hub of the UK, and having historically seen some of the country’s strongest housing market growth, it remains a firm favourite.
Next on the list for investors were Manchester and Liverpool, both of which would be the prime target for 34% of investors. These cities in the north west of England have seen significant levels of regeneration over recent years, as well as major transport and infrastructure improvements which have boosted their property markets.
What’s more, these areas are also much more affordable places to buy and live than the capital. This makes them attractive for investors looking to prioritise yields, as well as for tenants who are looking to get more for their money from their rental home.
Next, Birmingham was the top location for 26% of GCC investors. The West Midlands city has also seen some transformational regeneration projects in recent years, many of which are ongoing, and it is a popular destination for both UK-based and overseas buyers.
As Al Rayan Bank points out, these cities have strong growth prospects right now, and they all posted record house price growth and rental growth in 2022, according to a JLL report.
Al Rayan adds: “Future growth expectations reflect the ongoing potential of regional cities; the same JLL report forecasts average growth in sale prices of 17% and rental growth of 18% over the next five years, with Manchester and Birmingham leading the field.”
Reasons to invest in UK property from overseas
Maisam Fazal, chief commercial officer at Al Rayan Bank, points out that foreign investors have historically relied on the UK’s property market due to its stability and reliability, with London chiefly being seen as the leading financial hub and investment target.
In recent times, investors from dollar-pegged countries in particularly have benefitted from the UK’s weakened pound, making it more cost-effective to invest. Yet overall, the UK’s currency is much more stable than in other parts of the world.
He notes: “Investors know they can rely on the UK’s stable currency, transparent legal system and its established network of skilled property professionals, which come together to make buying and owning property here a headache-free experience.
“It has consistently delivered an attractive return on investment, despite the slings and arrows of global political and economic instability.”
Fazal adds that he likes of Manchester and Liverpool – among the UK’s other major cities – are places that foreign investors are increasingly becoming more aware of, too.
