Transcription
Every year, we invest about 1 million into UK property. To make our decisions, our team spends thousands of hours researching the best places to buy around the UK. However, this research also highlights the worst places to invest.
So, let's take a look at the four areas that the team and I are going to be avoiding like the plague this year, and exactly why they are so risky. I'll also give you some tips on how investors can still make money in those markets.
On the surface, our first location looks incredibly attractive. The prices are relatively low, the rental yields look good, and rents have been rising faster than anywhere else in the UK. But there's a serious problem brewing.
You see, this region has been waging what can only be described as a war against landlords for years. During COVID, they implemented the strictest measures on evictions and rent increases in the entire UK. While other regions eventually relaxed those measures, this area held on to them longer than anywhere else.
But it gets worse. There's a new housing bill being proposed that would cap rent increases at 1% above inflation, up to a maximum of 6%. The impact of this is already showing; major institutional investors are voting with their feet, with nine out of 14 of them already declaring this region unattractive for investment.
So, where am I talking about? Scotland. While Edinburgh and Glasgow might still attract headlines for their strong rental demand, the political risk is simply too high for most investors in 2025.
Our second location is particularly interesting because it's right next to London. Despite a rocky few years, London is starting to look like a solid investment again, with house prices holding steady and rents going up. This means that yields for investors are looking pretty good.
However, this nearby region is facing some serious challenges. This area already has some of the highest property prices outside of London, but unlike London, it doesn't have the prestige factor or the international rental demand to allow it to shrug off challenges.
Investors here are getting hit from two directions at once. The recent mortgage rate increases are hitting this region particularly hard because of those high purchase prices. Now, investors need to pay 5% extra in stamp duty, up from the previous 3%. Those high prices mean that extra really hurts.
But what's really concerning is the lack of growth potential. While areas like the Northwest and Yorkshire still have room for price growth, this region has hit a ceiling. Prices simply can't go much higher without becoming completely unaffordable.
I'm talking, of course, about the Southeast of England—the kind of communities within an hour of London that are lovely places to live but are suffering from high prices relative to earnings and low yields for investors. Don't get me wrong; there will still be plenty of demand, and it's hard to make a disastrous investment somewhere like this. But in terms of growth potential, there aren't so many better opportunities out there.
Our third location reveals a shift in the UK property market that nobody saw coming. Just two years ago, everyone wanted a piece of the action. The race for space during the pandemic sent property prices soaring here, and holiday let investors, in particular, were making record returns.
But now, the tide has turned. Holiday lets have lost their special tax status, so owners are now paying the same taxes as regular buy-to-let owners, but with far more uncertainty over how much rent they'll bring in. Even worse, if your holiday let isn't rented out for enough days during the year, it stops qualifying as a holiday let. Local councils can now charge up to 300% of the normal council tax rate if they consider it a second home.
But it's not just the exchanges causing problems; the entire holiday let market is showing signs of stress. Properties that were once generating premium short-term rent are now flooding back onto the regular rental market, increasing supply and putting downward pressure on both prices and rents.
So, similar to number two, number three is actually a category instead of a city. We're basically avoiding any big holiday hotspots like the Cotswolds, Brighton, and parts of Wales. If it saw a boom in holiday lets during the pandemic, it's now facing this perfect storm of increased council scrutiny, changing travel patterns, and oversupply in the market.
Even if holiday lets aren't your thing, all of this is going to have a knock-on effect for the regular long-term rental market and sales market, so we will be avoiding it.
By the way, if you want a more detailed breakdown of the numbers and all the investment areas around the UK, you can download our property toolkit in the description.
This brings us to our fourth location, or rather another type of location that's showing some concerning warning signs for 2025. At first glance, these areas might seem like the perfect opportunity for investors. The property prices here are some of the lowest in the UK, which means you can get started with less capital. With rising rents across the country, surely that means great yields, right?
But here's what most investors miss: when property markets enter growth phases—which is starting to look more likely for 2025—it's not these cheaper areas that benefit first. In fact, it's quite the opposite. The most expensive areas tend to be expensive for a reason; they have stronger job markets, better transport links, and more local businesses.
So when the market starts to grow, these are the areas that see the benefits first. Meanwhile, the cheaper areas, despite their attractive entry prices, often lag behind. They might see a small burst of growth right at the end of a boom, but it's nothing compared to the steady growth that you see in stronger markets.
But there's an even bigger risk here. With the new rental reforms that are coming, it's going to become harder to deal with non-paying tenants. In areas with fewer jobs and lower wages, you're naturally going to have a smaller pool of tenants who can reliably pay their rent.
So while these places might tempt investors with their low prices, the lack of local jobs and business growth means you're taking on significantly more risk as a landlord.
As much as I hate naming particular places because it's going to upset people, examples of the type of area we're going to be avoiding are places like Grimsby, Hartlepool, Middlesbrough, and Barrow.
However, as I mentioned at the beginning, there is still a way for investors to make money in these areas and in any areas. Over time, I've learned that there's no such thing as a universally bad area—only bad timing and poor strategy.
Let me explain what I mean. In every single location we've discussed, there are investors making excellent returns right now. Some are doing renovations that add massive value, others have built strong relationships with local estate agents who bring them the best deals, and some simply know their local market inside out.
So if you fall into a category like this, don't take what I've said to heart. Take each deal as it comes and think about your own personal skill set.
But if you're looking to buy and hold property with no particular connection to a specific area, then I would subscribe to the channel. Next week, we're going to be revealing the five best cities to buy property in 2025.