Is the East Midlands a Good Place for Buy-to-Let?
According to JLL, rising demand and affordability means the East Midlands is forecasting up to 17.5% price growth over the next five years.
The majority of this growth is being driven by the three ‘core’ East Midlands cities – Derby, Nottingham and Leicester – all of which are pushing new amenities to the forefront that are attracting new residents and investment.
Using properties to buy in Derbyshire as an example, while the average UK property price is now surpassing £340,000, the average property in Derbyshire sits at £223,218.
This is a clear signpost for investors for several reasons. Firstly, and perhaps most obviously, it’s an affordable, accessible market. Secondly, this means Derby rental yields are currently averaging 4.20% – outperforming the 3.8% UK average.
With growth forecasts suggesting plenty of future potential on the horizon, the East Midlands remains a top location for buy-to-let investment.
Population: 258,000 (516,000 in wider Derbyshire)
Rental yields: 6.07%
Average property price: £180,966
Growth last 10 years: 55%
Well known as one of the cities that kickstarted the Industrial Revolution, Derby is the home of some of the country’s first factories and industrial buildings.
Out of all of the East Midlands cities on this list, it’s the most affordable, which has contributed to some of the best rental yields in the East Midlands. Averaging 4.20%, property in Derbyshire is seen as a popular choice for those that want to build long-term rental returns.
With extensive transport links, Derby’s position at the centre of the UK means it is easily accessible with other areas of the country. Alongside Derby Railway Station, a number of major road links and East Midlands Airport just 15 miles away, Derby will also host a major hub in the upcoming high speed rail route.
This level of connectivity has made Derby a popular destination for companies to locate their head offices. Key employers in the city include the University Hospitals of Derby, Rolls Royce, Bombardier and the University of Derby – all of which are driving exceptional tenant demand.
The effect this has had on property prices in Derbyshire is significant – JLL predicts that prices could rise by 17.5% over the next five years, while the last 10 years has seen prices rise by 55%. It’s this growth that makes Derby one of the top places to invest in the East Midlands in 2023.
Population: 278,000 (532,000 in wider Nottinghamshire)
Rental yields: 4.92%
Average property price: £171,762
Growth last 10 years: 77.2%
Nottingham is a core East Midlands city, surrounded by beautiful countryside and with historical links to several manufacturing industries including lacemaking, bicycle and tobacco.
The city has an exceptional transport system, sharing all of the major links of the other East Midlands cities while also being home to the UK’s greenest bus network and a light tram system experiencing £1 billion of investment.
Nottingham is well-known for its educational institutions, home to both The University of Nottingham and Nottingham Trent University. Welcoming over 60,000 students each year, there’s a constant supply of potential graduates and professionals, making the market attractive for both investors and developers.
In terms of property prices, this level of demand made the city one of the leading destinations for growth in the country. The average property price sits at £231,554 and rose by 45% over the last 10 years, driven by the above-average infrastructure and employment opportunities available.
Population: 280,000 (441,000 in wider Leicestershire)
Rental yields: 5.31%
Average property price: £206,498
Growth last 10 years: 80%
Dating back to the Roman times, Leicester has a strong historical background with extensive links to the Industrial Revolution.
Population growth over the last ten years for Leicester has been unprecedented, causing a large-scale gulf between supply and demand. As the population has grown, a shortage of rental accommodation has taken hold, increasing rental yields across the city.
Home to the University of Leicester, Loughborough University and De Montfort University, the educational base contains over 43,000 students, creating a youthful population and the potential for even more demand going forward.
With the second largest economy in the East Midlands, Leicester is home to businesses such as Next, HSBC, Santander, British Gas and DHL, highlighting the employment opportunities that are contributing to both graduate retention and increased tenant demand.
Compared to some of the locations on this list, Leicester property is one of the more expensive assets in the East Midlands. This is largely down to its growth of 45% over the last 10 years, although future forecasts suggest it will keep pace with cities such as Nottingham and Derby going forward.
Rental yields: 3.67%
Average property price: £276,164
Growth last 10 years: 48.54%
Northampton is one of the more ‘emerging’ markets on this list, relatively unknown for investment compared to destinations such as Derby and Nottingham.
Thanks to its extensive network of businesses, Northampton is in high-demand with those moving to the area for work, which has led to some of the highest price growth on this list and property in the town selling in 33 days on average.
With 18.5% of Northampton’s property market living in private rented accommodation – a figure set to rise by 2025 as more people look to rent instead of purchasing – it’s expected that Northampton’s rental prices could increase.
Currently, however, this level of growth means that prices are higher and yields are slightly lower than its East Midlands counterparts, although forecasts do suggest the potential for exceptional growth going forward.
Best Places to Invest in the East Midlands 2023 – Capital Growth
For those exploring Buy-to-Let opportunities in East Midlands cities, each of these hotspots could be a potentially lucrative investment location.
That said, Northampton and Leicester have seen the biggest price increases over the past 10 years, with 77% and 80% growth.
However, future forecasts have highlighted which cities across the East Midlands could see the biggest increase in property prices over the coming years.
Derbyshire is in the midst of its biggest transformation to date, and with new regeneration schemes continuing to emerge, Derby is quickly becoming a Buy-to-Let investment hotspot for 2023.
Best Places to Invest in the East Midlands 2023 – Rental Yields
The average UK rental yield is currently sitting at 4.71%, but in East Midlands cities, rental yields are reaching as high as 6.07%.
While Northampton lags slightly behind with 3.67%, the potential of the East Midlands is undeniable. Not only are regeneration schemes the driving force behind the forecasted property prices, but they are also at the root of the region’s exceptional rental yields.
Derby and Nottingham are already benefiting from significant regeneration, but with Northampton’s redevelopment cycle falling behind these leading cities, this is reflected in the town’s average rental yield.