The Property Investment Brief: Newcastle, UK

Where next to invest? We profile the world’s top property hotspots, detailing everything an investor needs to know.

The Essentials

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House Prices
5.6pc in April 2017 (Hometrack)
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Returns
4.2pc yield (KIS Lettings)
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Demand
200pc rise in interest (Q1 2017, TheMoveChannel.com)

Where is it?

Located in North East England, Newcastle sits on the River Tyne, a position that once made it one of the biggest shipbuilding hubs of the Industrial Revolution. Today, the city has transformed itself into a science and business centre, retaining its industrial grit while building a new reputation and identity as a metropolis buouyed by modern culture. The Victorian quayside now merges with a younger student-friendly backdrop, with the nearby coast of Tynemouth also becoming a surfing hotspot.

Who lives there?

People from Newcastle are easy to spot: they are the ones boasting about their home town, a pride that mixes with a welcoming, likeable personality. With two large universities, including the Russell Group institution Newcastle University, the city is home to a sizeable number of students. That number has doubled over the last 15 years, resulting in a diverse, international population, which reinforces the city’s reputation for nightlife and also brings investors to the area, both for its student housing sector and buy-to-let opportunities.

Newcastle-Stock-2

Why invest?

“Northern Powerhouse” is the buzzword of the moment and Newcastle is one of the reasons why. At a time when London is seeing house price growth slow, Newcastle is one of the thriving regional cities where the property market is going from strength to strength.

The city is enjoying impressive economic growth, which, combined with record low mortgage rates, is helping to fuel demand for housing. With supply struggling to meet that demand, the city has recorded above average house price increases over the first quarter of 2017. In April 2017, property values jumped 5.6 per cent month-on-month and 4.2 per cent year-on-year, above London’s 2.2 per cent. Crucially, though, prices are not overheated: price growth is outpacing earnings growth, but affordability remains in line with the long-term average. This means that buyer demand will continue, pushing up prices further. Indeed, transaction volumes are stable, particularly in and around the centres of the cities in the area. As a result, the potential for investors to enjoy capital growth is strong.

Buy-to-let opportunities are also attractive: rising prices mean that yields on rental properties are decreasing to an average of 4.2 per cent, according to KIS Lettings, but due to the low starting price point, returns remain significantly higher than those available in London (where yields are an average of 3.2 per cent). In the city centre, rental yields can reach as high as 6.9 per cent, while nearby city Gateshead is also a buy-to-let hotspot, with an average yield of 5.2 per cent.

Newcastle’s vast student population means that the university accommodation sector is also a popular target for investors, with the city ranked 8th in the UK for student buy-to-let returns. New purpose-built developments continue to launch, with the number of student beds jumping notably in recent years.

Development and regeneration are both signs of Newcastle’s economic growth, not only in the student housing sector, but also in commercial property. Three major projects, the Stephenson Quarer, Pilgrim Street and Science Central, all include residential homes and other units such as retail outlets, restaurants and teaching facilities. Office space is present in each, capitalising on the increasing number of new businesses in the area, with city centre office take-up rising 14 per cent in Q1 2017. Even the care home industry is a sector worth considering, with 32 per cent of the population aged over 50, a number that’s projected to rise 13.6 per cent by 2029.

Construction is climbing, but with strong travel connections, including some of the UK’s most punctual airports (OAG), and HS2 on the way, demand for Newcastle housing is only likely to go in one direction, for buyers and investors alike.

Who’s Investing?

UK investors seeking more affordable opportunities during tough conditions for buy-to-let are looking to Newcastle as a cheaper alternative to markets such as London. Investors also hail from abroad, though, thanks to the weakening pound in the wake of the country’s Brexit vote, with buyers from China, Russia and the Middle East courted by agents and developers.

Agents say…

“‘Northern Powerhouse’ is the buzzword of the moment and Newcastle is one of the reasons why.”

 

Find out more:

View all properties for sale in Newcastle

 
 

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