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In the first of our series, on why York is an ideal investment location, we focused on the extremely healthy price growth the city is enjoying. The second instalment will look to the burgeoning rental market within the city of York, a market that has taken off in the past 12 months.
CBRE’s residential outlook published in August 2015, “British Living: A town and city compendium report”, helped elevate York above many other regional cities as the next hotspot for investment. With its below average unemployment rate and strong rental increase over the past 12 months, York is a location packed with opportunities and primed for investors.
York rents increased by 26% in 2015, the greatest rental increase across the whole country as reported by CBRE. With this 26% increase, the average rent in York has hit £901, £158 more than the UK average of £743 (excluding London). The rental growth in the city of York is now an incredible 7% higher than any other city.
The growth in demand is directly linked to the growing population of the city, with York having a population growth rate of 9.4% between 2001-2011, compared with a 7.2% average growth rate across the UK, and the third fastest overall. With a population growth powered primarily by an increasing number of students and young professionals being attracted to York, rental demand is increasing due to the demographic preferring the flexibility of renting than becoming homeowners.
By the end of 2015, the rental market in York was particularly strong among properties valued at between £120,000 and £200,000, while recently there has been a distinct shift in the average length of tenancy, with an increased demand for properties available long-term. Whereas in 2013 when the average tenancy was six months, now there is an increasing amount of professionals relocating to the city who choose to take on a fixed term tenancy agreement that matches the duration of their employment contract.
The Telegraph ranked York as one of the best locations in the UK for investors, with average yields of 8.61% found in the YO1 postcode where rents have reached a premium due to the location exclusivity.
As high as demand is currently for property in York, over the next few years it is going to increase even further. York Central is now an Enterprise Zone, backed and funded by the government, and is estimated to create 7,000 high-value office-based jobs, helping to grow York’s economy by 20% and boost average wages within the city. The total value expected to be added to the region’s economy is in excess of £1 billion and, with businesses that move to York Central receiving business rate relief for the first five years, the Enterprise Zone provides further incentive for inward investment and business growth into York for years to come.
York will receive more than £4 million over the next five years to improve the city centre, with an additional £800,000 invested annually to power initiatives aiming to improve the business environment in the city.
Although, as detailed in the first part of this series, York has the UK’s strongest capital growth, property in the northern city still offers great long-term value to investors.
Average asking prices of £209,249 mean that any purchases made now will not only capitalise on future appreciation, but the strong rental growth will yields alone to double-digit returns.
Tomorrow we will take an in-depth look at our third and final reason to invest in York – a blossoming student population that are creating high demand for privately rented student accommodation in the historic city.
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