Newcastle is one of the UK’s fastest-growing cities that is currently undergoing impressive change and considerable regeneration. There is a strong existing rental demand and forecasts are projecting the creation of 14,000 new jobs over the next few years.
All indications are pointing towards considerable capital growth as one of the country’s most rapidly developing locations offering investors exciting new opportunities.
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Property Prices
According to Zoopla, as of November 2020, Newcastle’s average property price of £207,104 is significantly lower than England’s average of £304,373whilst the upward trajectory of the value change is in line with the national average at around 6%.
For investors, the key take aways from these figures is that prices are currently considerably lower than many other investment options in the UK and also that there is now a window of opportunity before prices climb due to the continued growth of the city and increase in demand for housing.
Rental Yields
The combination of low property prices and strong rental demand have pushed yields upwards in recent years, in some of Newcastle’s postcodes rental prices have increased by as much as 20% over the last 5 years.
Average rental yields in certain postcodes, particularly the central Newcastle areas, are strong for example the average rental yield for NE1 is reported to be 6.3%, the average in NE2 is 7.3% and in NE6 is 7.4%.
Looking forward, with the projected job creation adding to an already growing population, combined with low property prices – there’s logic to say these yields could increase further.
Rental Demand
When considering a location for investment rental demand is a key factor, any sensible investor will focus not only on the current demand, and present housing shortfall but also consider where rental demand is likely to increase and why.
Not only does Newcastle have a strong economic centre, it is also home to two major universities that employ around 10,000 between them and also have a total student body of around 45,000.
The city of Newcastle has a population of around 300,000 and the population is predicted to grow by at least 7,300 by the end of 2022 and the continued economic growth is expected to attract new skilled workers to the city – 14,000 new jobs are set to be created over the next 10 years, student numbers are also set to rise. The city’s population growth is set to continue to outpace the planned construction.
Newcastle has been establishing itself as one of the UK’s top locations for digital businesses, in January 2020 this was recognised as the BBC selected the city to be its base for its design and technology hub.
The digital and creative sector in Newcastle contributes over £1.3billion to the city’s economy and supports over 25,000 jobs with an average salary of £35,000 per annum. The city is reported to be second in the UK for high-growth digital businesses.
In other sectors, Newcastle’s economy is growing rapidly. The city is incredibly forward in the industries that are growing and gaining momentum with knowledge intensive sectors, such as medical science, and tech driving consistent economic growth. Newcastle is one of only 6 designated UK Science Cities and is internationally renowned for its pioneering research and diagnostics.
There are also four national excellence centres in the city that focus on sectors such as offshore engineering, life sciences, big data and energy systems.
Newcastle has a tremendous business and professional services sector, with over 19,000 companies operating in the sector and with the third largest concentration of employees working in financial, legal and accounting, in the country.
With a strong academic base and being positioned on the coast, the city has seen accelerated growth of its marine and offshore industries, the sector has registered a 60% growth rate over the past 4 years.
The local universities all offer courses in sustainable energy, marine science and other related subjects which are likely to place skilled workers into the local economy, a sector which already supports over 15,000 jobs and is set to grow further.
With so many businesses operating in high-value industries and the numbers only set to grow there is set to be further creation of better paid, professional roles which is a positive for landlords who own quality city centre properties.
Tourism
Tourism accounts for 12% of Newcastle’s economy with both domestic and overseas visitors being attracted to the city for its vibrancy, the city’s proximity to the beaches and castles of Northumberland make it an even more appealing place to visit.
Education
Newcastle is a dedicated Science City and home to many leading academic centres with focuses on digital technologies, smart data, urban sustainability and ageing, the city is likely to be the location of many significant breakthroughs in the years to come.
The University of Newcastle alone is the third largest employer in the city, sustaining over 8,000 jobs. Together with the University of Northumbria, they have a significant impact on the local economy. Both are set for expansion and growth as they open new premises and form new connections with local industries.
Transport
The high speed rail network HS2 is intended to dramatically improve national transport connections between key cities and in particular to improve the link between north and south. When it opens HS2 will arrive directly into the city’s Central Station and will cement the city’s status as an international gateway for the North East of England.
The North East Combined Authority is also currently working together with National Rail with a view to improving the East Coast Main Line for local services and for the provision of freight.
In recent years, Newcastle has seen a considerable influx of investment into multiple projects and developments and according to Newcastle City Council, a further £1.5billion worth of investment is planned for the city centre creating new business districts together with improvements to transport and public spaces.
Though Newcastle as a whole is seeing substantial improvement and key industries are experiencing significant growth – the city centre is where investors are likely to find the very best opportunities.
The capital growth potential in Newcastle is exceptional as the city sits on the brink of a tipping point with so much investment inbound and industries of the future set to grow exponentially in the coming years.
Entry prices are low and yields impressively strong, supported by growing rental demand from increasing population numbers and a fast-growing economy – Newcastle is potentially one of the most rewarding property markets currently available to investors in the whole of Britain.
