Estate and lettings agent opportunities in Stoke-on-Trent

Opportunities: UK house prices and rental yields have continued to rise in 2018 despite economic uncertainty, ongoing Brexit negotiations and recent crackdowns on property purchases and rental incomes. While buy-to-let investment is now harder to manage – no longer offering a quick or reliable path to capital gains – savvy investors continue to seek opportunities in the residential property market.

Considerations for property agents

With demand for housing remaining firm, estate and lettings agents can benefit from understanding the factors which make an area desirable for housing development and buy-to-let investment. Knowing where to focus efforts can lead to better results.

This analysis by property development firm Pall Mall Estates: Sycamore Gardens explores how property agents can identify regional opportunities through a case study of the Stoke-on-Trent region.

The article provides advice based on the idea that agents should:
  • Possess a comprehensive understanding of targeted local markets
  • Investigate indications of regional growth and desirability
  • Consider signs that buy-to-let investors and homeowners look out for

Why Stoke-on-Trent?

As a traditional hub of our old industrial economy, the Stoke area is undergoing significant economic change. This is partly driven by its proximity to the thriving cities of Manchester, Birmingham and Newcastle-under-Lyme.

Data from 2017 reveals the North of England delivering rental returns almost twice as large as in the South. With investors and developers flooding these major cities, it is worthwhile considering nearby opportunities which may be easily overlooked.

Understanding the desirability of property in Stoke-on-Trent

House prices

Contemporary guidance suggests that residential property investment should now be used to generate regular income, rather than capital gains at the point of resale. Nevertheless, if properties are being built and prices are rising in an area, one can assume that the market is in good health.

While Stoke showed the smallest average price increase between 2012-17 in the Midlands (23% – from £89,000 to £107,371), this is not necessarily a negative. Affordable housing, requiring less initial investment and reducing overall cost of living, can be very appealing for would-be owners, landlords and tenants.

Rental yields

Any good buy-to-let investor will have a thorough idea of expected rental yields (annual rent as a percentage of property purchase price). Areas offering high yields are likely to attract landlords in greater number, as meeting mortgage repayments can be more easily guaranteed even if rents should dip below projected levels.

Stoke-on-Trent delivered annual rental yields of 5.67% according to 2017 data, on par with northern strongholds in Newcastle (5.59%), Gateshead (5.78%) and Liverpool (5.96%).

Employment & wage growth

Sector growth can be a reliable indicator of future opportunities in the property market, especially if unemployment in the area is low and constantly falling. Expanding industries promise to attract additional people into a region’s skilled workforce. Wherever there are skilled workers, there are naturally tenants in waiting.

Fortunately, a skills gap in Stoke-on-Trent (with NVQ Level 4 qualifications below the national average) is being aggressively redressed by local council initiatives hoping to attract roughly 2,500 engineers every year for the next decade. Another positive signal is the Local Enterprise Partnership between Stoke-on-Trent and Staffordshire, promising to deliver at least 7,000 new jobs in the area between 2016-21.

In a strategic location, with a good reputation as an affordable city which is supportive of new businesses, Stoke also delivered an average earnings increase of 8% between 2012-17.

Transport connections

Consider the availability of transport connections to neighbouring areas. Sometimes an area’s closeness to other major city centres is more than enough reason to invest. Remember: a community of established commuters contains the potential for thousands of tenancies.

Supporting economies across the Midlands and beyond, Stoke is home to a significant commuting workforce. The area’s many road, rail and airport routes provide access to a host of major cities within an hour’s journey. It is estimated that 90% of the UK population lives less than four hours away. Furthermore, approximately thirty UK universities are within an hour’s drive of Stoke-on-Trent, making the region ripe for investment in student accommodation.

Deprivation levels

The Index of Multiple Deprivation, recording relative deprivation across the UK, provides valuable insights into regional health in terms of:
  • Income
  • Employment
  • Education, skills and training
  • Health deprivation and disability
  • Crime
  • Barriers to housing and services
  • Living environment

Stoke consistently outperforms many neighbouring towns and cities in the Midlands index, with notably low deprivation levels in living environment (5th of 7), housing (6th), employment (6th), and education, skills & training (7th). These are critical measurements of an area’s potential attractiveness to investors and tenants.

Infrastructural investment

Local authorities are constantly releasing detailed strategic plans about area infrastructure. A variety of development projects and inward investment initiatives in a local area can be an excellent indicator of future potential, as these are intricately linked to projected population and economic growth.

A cursory glance reveals Stoke-on-Trent’s skyline is dominated by new commercial structures, representing a sliver of the Council’s 10-year investment of £2bn into local amenities and retail, office and industrial schemes.

Summary

The most promising property is one where people want to live, served by ample conveniences and amenities. Understanding local conditions in the UK’s high growth areas – regarding inward investment, shifting demographics or transport availability – can signpost unmissable opportunities for property agents. By these metrics and more, Stoke-on-Trent is clearly a town with high potential. Property agents should consider the same measures in their analyses of local property markets.

While rental yields and property prices will always be a guideline for buyers and investors, estate and lettings agents should always consider the full range of factors affecting the desirability of UK properties.

 

Kindly shared by Pall Mall Estates: Sycamore Gardens