It certainly shouldn’t come as groundbreaking news to anyone that location is important when choosing a property investment. Probably the single best-known property market truism is the idea that the most important factors are “location, location, location.” Even so, it is easy to underappreciate just how true that truism is, and just how completely vital location choice can be to the success of an investment.
Property investments carry two separate sources of returns; rental income and capital growth. A large part of the location’s importance to making the right choice of investment property is down to the fact that it plays a central role in both of these potential revenue streams.
Generating rental income naturally relies on attracting tenants. The easier it is to attract tenants, the less time your property will spend empty and the more time it will spend generating liquid returns in the form of rent. On top of that, the more attractive a property is to tenants the more rent you can charge for it.
The role of location in this is significant. In fact, surveys suggest it is the single biggest factor that people consider when choosing a property to live in, whether they are renters or buyers. Research by My Home Move shows that 58% of people described location as the key reason they chose a particular property. This beats out such other favourite features as a garden (which swayed 29% of respondents) and even the matter of price (which was the deciding factor for 38%). The survey also looked at this question from the opposite point of view, and discovered that 43% of respondents said that a bad location would be enough to put them off of a property, and indeed would be more likely to turn them away than other factors such as price.
As for what constitutes a good location in the eyes of potential tenants, the same survey showed that transport links were the single biggest factor. This is arguably especially important to the rental market, which contains a comparatively large contingent of young professionals. The availability of green space and proximity to key amenities such as shops and leisure facilities were also identified as important factors.
As for capital growth, as property is almost invariably a long-term investment this is certainly a factor to consider along with rental income, and forecasts vary significantly between different locations.
Investing in a location that is confidently forecast for growth or which is even considered stable and safe can make a huge difference to your gains when you come to sell compared to investing in a market that is overstretched and considered due for a price drop. An up-and-coming location will also be more likely to experience significant rent increases in coming years, and can therefore potentially boost rental income as well as capital appreciation.