When it comes to residential property, the areas experiencing the biggest growth are generally the best locations to invest in. If a location is becoming ‘hot’, or is already an established hotspot, it stands to reason that your return on investment (ROI) will be high.

But where are the property hotspots to be found so far this year and where did prices rise highest in 2017?

Midlands and the North dominate

Thanks to the dream combo of affordable house prices and steadily rising house price growth – which means investors can buy on the relative cheap but still receive an excellent return on their investment – the Midlands and the North are currently home to the property hotspots of the moment. And it’s the big regional players – Manchester, Liverpool, Birmingham, Sheffield, Leeds, Nottingham, Newcastle and Leicester – which are outperforming the rest.

Arch-rivals battle for investment

Manchester and Liverpool, seen as the two main drivers of the government’s so-called Northern Powerhouse agenda, have plenty to attract property investors. Both cities have fine and proud histories, but each is also growing fast by adapting quickly to the modern world. Manchester has become something of a tech hub, with the city’s Northern Quarter acting as a popular base for digital companies and startups, while nearby Salford – home to MediaCityUK – has brought more young professionals than ever before to Manchester and its environs. The prospect of HS2, which would link Manchester and London on a greater scale than ever before, is further helping to drive growth.

As we pointed out in a previous piece, yields are strong in Manchester, with demand very high thanks to the city’s large population of young professionals and students (some 30% of Manchester’s housing stock is now in the private rented sector). Yields are, in fact, around twice as much as what investors in London can achieve, helped by Manchester’s more affordable property prices. ROI is at its peak in places such as Fallowfield, Salford and Chorlton, all in the Greater Manchester area.

In Liverpool, meanwhile, significant regeneration and an attempt to bring dilapidated residential property back into use has made the city one of the country’s booming property investment hotspots. Most famous for football and The Beatles, Liverpool has been transformed in recent years with significant inward investment, a large number of new jobs being created, worldwide attention thanks to its status as the European Capital of Culture in 2008, and huge infrastructure projects such as the £5 billion Liverpool Waters scheme.

Liverpool has a thriving private rented sector largely due to a huge student population and a growing number of young professionals, drawn to the city by new jobs and its standing as a cultural heavyweight. Investors will be attracted by the low average property prices and the ability to build high-yield portfolios without breaking the bank. Prices, too, are rising, and property here sells rapidly, which means those looking to turn property around quickly also have plenty of reason to cheer. Even in the more upmarket suburbs, prices aren’t prohibitive, while yields remain strong throughout the city. As a starter location for investment, there are few better places than Liverpool – but it also offers plenty for seasoned investors as well.

Yorkshire and the North East perform strongly

Leeds, helped by international demand, strong transport links, its status as a major legal and financial hub and its appeal to young professionals priced out of more expensive areas, is another hotspot – with strong yields and excellent capital gains on offer. Its neighbour, Bradford, also offers investors the perfect combo of high tenant demand and affordable property prices. It is, in fact, one of the most affordable locations in the UK and has been the beneficiary of ongoing regeneration.

Sheffield (where investors can achieve fantastic yields), Hull (which has been given a boost by its status as the UK’s City of Culture 2017) and increasingly trendy Newcastle (where prices are cheap and demand high) are other locations that investors might want to consider.

Midlands holds its own

The Midlands – and in particular Birmingham, Nottingham and Leicester – is giving the north of the country a run for its money when it comes to yields, capital gains and investment potential. House prices rose steadily throughout 2017 in Leicester, while average selling times have been falling for a while. A large student and renting population make it ideal for buy-to-let investors. In Nottingham, meanwhile, high tenant demand and a low initial investment both make property here appealing to investors, while infrastructure projects (including extensions to the city’s tram network) are helping to keep demand high.

Birmingham, often viewed as the UK’s second city, has been enjoying a resurgence for some time. Large inward investment, major companies such as HSBC using the city as a base, the prospect of HS2 driving up demand and house prices, and its strategic position right at the heart of Britain are all helping it to thrive as a property investment hotspot.

2017’s best performers

Research by the Halifax at the end of last year found that house prices in Cheltenham rose at the fastest pace in the UK during 2017. The spa town in Gloucestershire, known for its racecourse, Regency architecture and large green spaces, recorded price growth of 13% to reach an average of more than £313,000. The popular coastal resorts of Bournemouth and Brighton were next up, rising by 11.7% and 11.4% respectively.

The rest of the top 10 was made up by Crawley, Newham, Peterborough, Gloucester, Huddersfield, Exeter and Nottingham, with 15 of the top 20 house price increases seen in London and the south of England.