There’s still money to be made from property, despite next year’s stamp duty rises for first-time buyers and the flurry of higher costs for private landlords. But to make the most, you need to choose the right type of property in the right place at the right time.
There are plenty of reasons to still give property investment a chance. Firstly, the market is set to be strong in the coming years. Estate agency Savills says house prices in the UK will rise over 23 per cent – equivalent of £84,000 on a typical home – by 2029. They’re going to rise around £15,000 next year alone.
Secondly, mortgage rates are set to drop. Hamptons, another agency, says the Bank of England base rate is likely to fall to 3.75 per cent in a year’s time and then 3.5 per cent in 2026, pushing down costs to mortgage borrowers.
Thirdly, if you have money in the bank you can get a head start by paying cash for an investment property. Estate agency Lomond says the average discount for a cash purchase is 17 per cent UK-wide. In some areas the discounts are bigger – 25 per cent in Yorkshire and Humber-side, and 22 per cent in the south east of England.
Finally, there’s just so much variation – property investments include buy to let, holiday lets, renovations, or predicting the next hotspot. But which offers the best returns? We’ve spoken to estate agents and property experts to bring you the top opportunities out there (including one that’s set to make £300,000 in five years).
THE CLASSIC RENOVATION
This five-bedroom house in Farnborough, Surrey, has ‘a wealth of potential’, according to the selling agent
Remember Sarah Beeny’s shows when she would buy a tired home, renovate it and then sell? Experts have plenty of advice on what adds value when you restore a property.
A sparkling kitchen adds 20 per cent, an upgraded bathroom 10 per cent and trendy bi-fold doors up to 10 per cent, explains Andrew Boast of home improvement firm Clearview. ‘These improve natural light and add functional benefits – key selling points for modern buyers,’ he says.
But be sure to factor in the delay it can take to secure good craftspeople to do any work.
On the market: This five-bedroom house in Farnborough, Surrey, has ‘a wealth of potential’, according to the selling agent, especially as it’s close to parks and schools and has bags of internal space (£650,000, romans.co.uk)
Five years from now? £950,000 – and even if you sell it straight after renovating you would get £850,000 suggests the agent.
CHEAP AS CHIPS BUT NEEDING WORK
This three-bedroom terraced house has had some work undertaken but more may be required if used as a home or buy-to-let
You don’t need a fortune to invest – of the almost 500,000 homes listed for sale at the end of November across the UK, some 5 per cent were priced £100,000 or less. And in lower priced cities like Bradford, Liverpool and Glasgow as many as one in six homes on sale can be bagged for under the magic £100k.
Experts have clear advice if a home seems deceptively cheap. Always ask agents as many questions as possible, check if a survey has been done recently and if not get one completed before making an offer in case there’s a deal-killing structural problem. And remember there are many small and typically low-cost homes on sale now as landlords quit the rental sector because of tax rises and stricter regulations coming in 2025.
On the market: This three-bedroom terraced house has had some work undertaken but more may be required if used as a home or buy-to-let (a handy buyer could undertake this work themselves). (£50,000, peteralan.co.uk)
Five years from now? £95,000.
UP AND COMING HOTSPOT
This two-bedroom cottage comes with a private rear garden and quiet village setting, plus countryside views
It’s tough to predict confidently the next hotspot but the lender easyMoney says this year’s most likely candidate is Derbyshire’s Amber Valley which has seen some monthly house price rises of 2% or more.
On the market: Packed with period features and a log burner, this two-bedroom cottage is described by the selling agent as a possible holiday home. Its private rear garden and quiet village setting, plus countryside views, makes this a promising investment for letting to tourists (£200,000, hallandbenson.co.uk).
Five years from now? Perhaps £275,000 with holiday let income.
BUY A HOME WITH A SITTING TENANT
This mid-terrace two-bed house in Ashington, Northumberland, is being sold via auction on December 11 with a guide price of £15,000 to £30,000
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If you want to try buy-to-let, a fast-track way is to get a property with a tenant in situ. The upsides, of course, are that the buyer gets an immediate income, and properties with tenants in place typically sell for less.
But buy to let is heavily regulated, so it’s key to check whether the property is being sold because of problems that may make future rentals difficult: for example a poor Energy Performance Certificate rating, failed gas or electricity safety checks, or whether agreements between the old landlord and the tenant may tie the hands of the buyer in future.
On the market: This mid-terrace two-bed house in Ashington, Northumberland, is being sold via auction on December 11 with a guide price of £15,000 to £30,000. (auctionhouse.co.uk).
Five years from now? Perhaps £45,000 with rental income of £5,000 per year.
BRING OUTBUILDINGS TO LIFE
This is a stone-built family home from the 1850s in Fettercairn, Aberdeenshire, with five double bedrooms and plenty of period features
Most important are two large former farmhouses and a range of agricultural outbuildings
Whether it’s beefing up a garden summerhouse to make a bijou Airnb pad, or turning substantial stone buildings into permanent homes, there’s money in these conversions.
Experts say the biggest challenge is typically insulating and making them energy efficient, as they were designed mostly for animals or storage. Utilities may also be an issue if the outbuildings are some way from established drains and power sources.
On the market: This is a stone-built family home from the 1850s in Fettercairn, Aberdeenshire, with five double bedrooms and plenty of period features. Most important are two large former farmhouses and a range of agricultural outbuildings. ‘There’s wide scope for the development of the outbuildings offering the purchaser a wealth of opportunities,’ says Hilary Murray of selling agency Galbraith (£725,000, galbraith.com).
Five years from now? Outbuildings converted into homes could sell for £300,000 each or be used for holiday lets, and the main house up to £850,000.
CONVERT PUBS OR SHOPS INTO HOMES
This large ground floor property in Exeter, Devon, has a basement and is set in a residential area with many properties for rent as Homes in Multiple Occupation
Although conversions typically require professional help beyond the skills of amateur DIY, there’s growing interest in commercial property being turned into trendy urban homes.
Direct Line insurance says there’s been a surge in applications to convert commercial, business and service premises such as offices and shops into homes. Analysis of council data reveals a staggering 63 per cent hike in commercial to residential change of use applications made in 2022 and 2023, with this year’s figure likely to be 20 per cent higher again. Direct Line’s Jonny McHugh says: ‘As demand for residential property continues to soar, it’s increased the attractiveness of converting commercial units for domestic use.’
On the market: This large ground floor property in Exeter, Devon, has a basement and is set in a residential area with many properties for rent as Homes in Multiple Occupation. The former shop could be converted into two flats, subject to planning (£100,000, helmores.com).
Five years from now? Two-bed flats nearby could be worth £300,000 each with large potential rental income.
MIX IT UP – INVEST IN HOMES AND SHOPS
This St Albans city centre property combines a takeaway on the ground floor and a period two-bedroom flat in need of renovation upstairs
‘Mixed use development’ sounds dull as dishwater but it’s one of the most lucrative ways to cash in on property – develop homes and shops on the same site. Just ask beauty salon owner Sue Ilic, 62, who transformed a run-down courtyard in Derbyshire into a £1million empire.
She says: ‘The landlady of my salon offered to sell the property to me. She knew I’d bought and sold properties and I had a good business at the premises. At first I was unsure of how I would raise all the funds – and there was a catch: it wasn’t just the salon for sale, but four commercial units, five flats and a huge cellar.’
On the market: This St Albans city centre property combines a takeaway on the ground floor and a period two-bedroom flat in need of renovation upstairs, but with sash windows and pretty fireplaces intact (£740,000, northwooduk.com).
Five years from now? The flat alone could be worth £750,000 and the shop bringing in £20,000 rent per year.