Why property investors should be looking to Sheffiel
2021-07-08
Since the housing market reopened after lockdown, the
release of pent-up demand has led to record levels of enquiries for homes
across the country.
During that period, we have consistently seen house buyers
looking to move out of more expensive areas, such as London and the South East,
in order to purchase homes with more space, garden areas and rooms.
As a result, once the dust has finally settled on the
pandemic, we firmly expect and advise property investors to look beyond London
and the South East for their next investment opportunity.
With the trend for home working looking to continue, it is
areas outside of the capital that will lead the property market boom. And for
good reason. The top ten UK places with the biggest increase in buyer demand
since March last year were all regions further north, whilst property prices in
the North have increased.
Of those cities, Sheffield is one of the most valuable areas
of the UK property market, with an estimated 248,804 dwellings, according to
Gov.uk figures. Properties here are valued at an average of £169,464, making
Sheffield a prime spot for property investment.
A growing economy and a growing population
This regional growth comes as no surprise. The fourth
largest city in England, Sheffield has a vibrant economy, which was growing
significantly before the pandemic, having experienced a net gain of 15,000
private jobs in 2019.
To keep that going, the local authority has implemented a
2020 Strategic Economic Plan, aiming to generate 70,000 new private sector
jobs, add thousands more new businesses and boost the local economy by four
billion pounds.
If achieved, this will help drive wages and wealth in the
area, which naturally boosts property prices and rents.
More recently, Sheffield has become a hive for innovation,
with international companies such as Boeing, McLaren Automotive, Rolls-Royce,
Tata and Toshiba setting up operations in the area. But it is the range of
major planned regeneration projects and a growing student population that are
perhaps of most interest to investors.
As we know, property prices typically rise when there is a
shortage of supply versus demand – it’s simple economics. Generally, the
increased demand is down to the population in the area expanding – with
Sheffield showing population increases across the all-important future buyers
and renters aged 20 to 24.
Many in this age group are students from the University of
Sheffield or Sheffield Hallam University, as around one in ten residents in
Sheffield are students. But even for those not looking to invest in student
property, a high number of students (around 25%) choose to remain in the city
following their studies, which benefits the buy-to-let market as many choose to
continue renting in the area post-graduation.
To meet the increasing demand for housing presented by this
population, Sheffield will need nearly 40,000 new homes by 2038, another
opportunity for investment.
The benefit of access
Another important driver of supply and demand is Sheffield’s
improving transport network. On the edge of the M1, Sheffield is very central
in the UK, and easy to access. This is fantastic for commuters and travellers
alike.
Currently, Sheffield is expected to benefit from the HS2
rail link, which will improve the time to travel to areas such as London for
work. This will potentially open up Sheffield to part-time commuters from
bigger cities.
What is the rental market in Sheffield like?
According to Jaime Hammond, Leaders’ Regional Lettings Director
for the North East, “Sheffield
boasts many benefits for property investors, but cost is certainly one of the
big advantages. House prices in Sheffield are affordable and offer a higher
yield than many areas located further south.”
Two-bed terrace houses are, on average, under £150,000 and
are let for £750 per month, giving a gross yield of 6%. Meanwhile, a three-bed
family home is likely worth £185,000 and could fetch a rent of £900 per month,
offering yields of 5.8%. Looking to a four-bed detached executive home, average
costs are just under £300,000 and rent is around £1,100 a month, giving a 4.4%
return for landlords in the area.
A hotbed of demand
Whilst 2020 was a bit of a rollercoaster ride for the
property market, we expect good things in 2021. Following positive news of the
vaccine, we forecast another strong boost to the housing market. Whilst there
will be regional variations, we will likely see prices in many areas rising
this year.
With interest rates low and the stock market volatile,
property remains an attractive investment opportunity for many. The buy-to-let
market will continue to be buoyant. However, it will be in cities like
Sheffield, rather than the traditional hotbed of London, where we will see the
most demand.
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