“A combination of factors point to Peterborough being a future buy-to-let star.”
The proposed stamp duty change poses a challenge to the property investment community as it means more capital is needed to invest. This could mean that longstanding buy to let hotspots become unaffordable, making way for new winning locations. Mortgage lender Lend Invest predicts a future of “cross country landlords” as investors go further afield for the best returns.
A potential property investment location to watch is Peterborough: it has always been a great destination for rental yields and now a combination of factors including Peterborough’s booming population and local house price growth point to the eastern city being a future buy to let star.
1) Regeneration to Raise Reputation
The city is currently being transformed thanks to a £1 billion regeneration program that is now underway. Key developments such as Gateway Peterborough and Fletton Quays will bring new housing, leisure facilities and employment opportunities to the city.
The long-awaited development of the North Westgate area of the city is finally in motion. This £100 million project will include a new cinema, a public square around Westgate Church, a hotel and new offices. The development is estimated to create 1,500 new jobs and it will help to create a vibrant leisure quarter in Peterborough.
2) London Commuter Belt Expansion
Peterborough’s regeneration will include an improved rail link to London, bringing the journey time down to 39 minutes, by 2019. As the cost of living in London becomes increasingly unrealistic and transport links along the East Cost mainline improve, more people will look to live further away for cheaper housing and a better standard of living.
3) Booming Population
Peterborough’s growing population is another factor that will increase demand for housing. Until last year Peterborough was the fastest growing city in the UK, and is still second, just behind Milton Keynes.
Peterborough City Council estimates the current population of Peterborough at 199,200 and it will increase 21.7% in the 15 years to 2031. The population increase is due to a mixture of a high birth rate and migration. Peterborough’s regeneration is likely to attract more people as the city’s image improves and people relocate for employment opportunities.
4) Realistic Property Prices
For property investors, Peterborough is a winning destination because it combines realistic house prices with high demand for rental property.
Property prices in Peterborough are reasonable, meaning they are accessible for investors. The average house price in Peterborough currently stands at 157,800, which is 45% less than the national average house price £288,000.
5) House Price Growth
The latest report from RICS named the East of England as the place where house prices are rising the fastest. RICS predicts that overall house prices in the UK should rise by 6% next year, but East Anglia could see a rise of 8% due to the strong local economy.
Buying investment property now means that investors will benefit from Peterborough’s realistic property prices and healthy rental yields but they may also benefit in the long term from capital appreciation.
6) Small Impact from Stamp Duty Rise
A current concern of investors is the 3% stamp duty surcharge which will come into affect this April. This will have an impact on investors’ initial cash flow and could deter people from investing in more expensive properties.
Considering the average priced property in Peterborough is £157,800, the new stamp duty will add an extra £4,700 to the upfront capital used to invest. This sounds a lot but the overall impact on gross yield is low because rental income won’t be affected and the purchase price is low. For example, a property bought for £160,000, the extra stamp duty would reduce the gross yield from 5.7% to 5.5%.
Although stamp duty poses a challenge to investors, now is still a great time to invest. When looking at the bigger picture it is clear that the demand for rental property will continue to grow, as will house prices.
With exciting regeneration bringing new opportunities and a growing population, there’s no doubt Peterborough is a city to watch in the future. Belvoir Peterborough is hosting an Investment Seminar on 27th January which will explore the development of the city in depth. For more information visit our property investor workshop webpage.
