Many invest in property to make a sizeable return on investment (ROI).
The UK’s housing market has an excellent track record of improving year-on-year.
But there’s no doubt that some areas have gone up more than others.
Know what these areas are is essential.
How UK postcodes work
The UK first began implementing postcodes in 1959. By 1974, the whole country was covered.
The system was devised by Royal Mail. It uses alphanumeric codes (i.e., numerals and letters) to categorise areas by district and sub-district.
There are currently over 1.79 million postcodes in the UK. This number grows as more building takes place.
Other investment considerations
There are many things other than location to consider before investing in property.
Firstly, there are many different types of property. These range from studio flats to mansions, and a lot in between!
Investing in flats is often particularly suitable to those living in cities looking to get into the buy-to-let industry.
What you will do with the property also matters. Renting them out can bring high yields, but so too can flipping them.
Meanwhile, many also like to simply live in them for several years before benefiting from their increase in value.
10 highest ROI UK postcodes
10. YO31, Yorkshire
In the north of the city of York, YO31 is a postcode which includes Huntington, Heworth and Tang Hall.
A house in this area costs around £319,458, which is significantly above average and therefore shows that this is a desirable place to live.
The typical yield for a property in YO31 is 9.1%, and house prices in this area have gone up by 18% since 2020.
9. SO17, Southampton
On the south coast of England, Southampton is an extremely popular place to live.
The SO17 postcode is in the north of the city, including neighbourhoods such as Portswood and Highfield.
If you own a ‘typical’ house in SO17, it will currently be valued at around £243,154.
The area has a yield of approximately 9.2%, proving that it is a profitable place to invest in property. And a typical rental fee in SO17 is £1,278 per month.
8. CF37, Cardiff
CF37 is in the far north of Cardiff, several miles above the city centre.
Nestled in the beautiful Welsh countryside, it is no surprise that plenty of people want to live there. The postcode includes the town of Pontypridd, and has a recent average yield of 9.2%.
Properties in CF37 had an overall average price of £156,351 in 2023, with most sales being terraced houses.
If you own a property in the postcode which you decide to rent out, you can expect to receive £1,110 per month on average to stay there.
7. SA1, Swansea
The SA1 postcode is in the centre of Swansea, and includes neighbourhoods such as:
- Townhill
- St Thomas
- Maritime Quarter.
And more.
SA1 has an average house price of £143,869 and costs approximately £1,206 per month to rent there.
People who invest in this part of the city usually get an excellent return on investment, at a 9.2% average yield.
6. YO10, Yorkshire
Yorkshire is undoubtedly one of the UK’s most beautiful counties.
And it is an outstanding place to invest in property, too. Much like NE6, you can expect a yield of roughly 9.8% on a house in the Yorkshire postcode of YO10.
In the past year, properties in this part of York have increased in value by 3%, taking the typical price up to £317,323.
5. NE6, Newcastle
NE6 is north of the River Tyne, and includes neighbourhoods such as South Heaton, St Anthony’s and Walker.
A house in this postcode costs around £167,111 on average, and has a typical monthly rent figure of £1,198.
You can expect an average yield of 9.8% in this part of Newcastle.
4. M14, Manchester
Manchester is one of the UK’s most exciting cities. So it’s not a surprise that lots of people are keen to move there.
For those who own a house in this postcode, the average yield is 10.1%, which makes it a very worthwhile investment.
The average house in M14 currently costs £208,703, which makes it relatively affordable compared to the city’s much higher average price.
You can expect to receive £2,679 per month, on average, when renting out a property in this postcode.
3. BD1, Bradford
Bradford is widely regarded as one of the UK’s most affordable cities.
But this doesn’t mean that your return on investment cannot be sizeable, too, under the right circumstances.
Over the past year, house prices in BD1 have gone up by 6%. The postcode is mainly in the city centre, making it a convenient location for buyers and renters alike.
A typical property there costs £68,409, while the mean rent is £755 per month.
You can expect a yield of roughly 10.6% on a house in BD1.
2. NG1, Nottingham
Nottingham is clearly an excellent city to invest in property.
While the NG1 postcode is slightly more affordable than NG7, with a typical asking price of £188,052, it still ranks second in the UK for your return on investment.
The average yield for a house in NG1 is 11.1%, with a typical rent of £1,413 per month.
Over the past year, property prices in this postcode have increased by 19%.
1. NG7, Nottingham
NG7 is one of the largest postcodes in Nottingham, covering much of the west of the city.
Lenton, Hyson Green and Highfields Park are three of the main neighbourhoods in this area. Many students live here, so it’s no surprise that NG7 is the UK’s best area to invest in property.
The average house in NG7 currently costs £229,560, and has increased in value by 16% over the past year.
The average rent in this area is £1,482 per month, with a typical yield of 11.3%.
Why are some postcodes more profitable than others?
All of the above postcodes have one thing in common: they are located relatively close to major cities.
People are keen to live in urban areas, as it usually offers:
- More job opportunities
- Better transport
- A wider range of restaurants and leisure venues.
And more.
If you live close to a city centre, you can also usually charge a higher amount for monthly rental payments, compared to if you were based in a ‘less convenient’ location.
For landlords who want to make a consistent income by renting out their property, anywhere close to a city makes sense.
There are plenty of places in Scotland and Northern Ireland that are excellent investments, too.
If you own a house in a not-so-profitable part of the UK, then you may want to sell as quickly as possible. In this instance, an alternative house-selling channel might be worth exploring.
The best areas for buy-to-let
When you are considering investing in buy-to-let, you should keep in mind that the ‘most profitable’ areas differ slightly, compared to house purchases.
Recent figures suggest that the best areas for buy-to-let include:
- BD1, Bradford
- M14, Manchester
- NE1, Newcastle
- SR1, Sunderland
- SA1, Swansea
You will likely get a lot of interest in your buy-to-let property if it is located close to a major university, because this means that lots of students will want to rent your house each year.
You will also attract lots of interest if there are excellent amenities in the area, and there is a commuter-friendly city nearby. All of this criteria applies to the five postcodes listed above.
There are plenty of worthwhile places to invest in buy-to-let in London, too.
While property prices can sometimes be volatile in the ‘wealthier’ parts of the city, figures suggest that the outskirts of the city represent healthy investments. These include: SE28, E12, E16 and SE11.
