Whenever I’ve had discussions with investors regarding property investment in Newcastle and the surrounding areas, I’ve always found myself covering the same points in great detail to give them as much insight as possible.
Suppose you are looking to establish or grow a portfolio in a particular area. In this case, it is crucial to look at the bigger picture rather than the basic fundamentals of an individual property, particularly if you are looking to achieve significant capital gains in addition to the rental yields.
Anyone can load up a property portal, select a property with an attractive asking price or a reasonable looking refurbishment challenge, and take the necessary steps to purchase it. This, however, is no guarantee of achieving a return on your investment. In addition to individual properties, you need to take an in-depth look at your intended property investment area.
A smart property investment strategy is built on time and numbers. I can assure you it isn’t a get rich quick overnight scheme (despite what some property “gurus” promise), and the due diligence you need to carry out to be successful is significant.
Like any business, you need customers in order to thrive. These customers are prospective tenants, and you need to invest in an area with the amenities and properties that appeal directly to them.
Therefore, as a smart-thinking and thriving property investor, you will be looking for areas with high demand from tenants, as well as display excellent potential for growth. This will secure the demand for your business as you look to provide the supply side for the rental sector.
It is this basis that initially formed my decision long ago to begin investing in Newcastle. This decision was based on the foundations built by five key elements, which I stand by when looking to invest in new areas. When all five components harmoniously marry together, then the basis for your investment will be sturdy.
Let’s take a look at these key points and the importance they have when investing in Newcastle and the surrounding areas.
The population of Newcastle. What are the demographics? How long do they typically tend to reside here?
The growth in population. The current population of Newcastle is 818,452. Ten years ago in 2012, it was 779,445; a ten-year growth of 5 per cent. By 2032, the population is expected to increase to 874,468. That’s another ten-year growth of 6.8 per cent.
This shows healthy and continued growth in Newcastle’s population, and a likely continuation for the next decade and beyond. This will push the prices of housing further for when you come to sell and ensure continued demand for the stock you would be supplying.
How long will this growth continue? With property investment standing as a long-term strategy, it is crucial to ensure any population growth is also long term. As you can see from the above figures, Newcastle’s growth is set to continue through the next ten years and even beyond.
Who are the businesses and employers driving Newcastle’s economy? Employers provide jobs and opportunities. These pay your tenants and provide your rental income and ROI. It is vital to invest in areas with plenty of employment opportunities.
Who's here
Is there support for businesses offered by the local authority or government? Should a business face financial difficulties, what will happen to its employees? If your tenants are made redundant or unable to find new employment, this would ultimately impact your ROI.
It's worth noting that North East businesses received support during the Covid 19 pandemic...such as Business rates relief, Citylife Business support, North of Tyne Innovation Recovery Grant, Digital Tech Resilience Grant, Outbreak Support Grant, Springback Round 2 Grant and the Omicron Hospitality and Leisure Grants.
How great are Newcastle’s schools? Excellent local schools have high demand from families, and getting a great long-term family onto your tenancy agreement is a fantastic win! 19 per cent of educational facilities in the Newcastle upon Tyne local authority were rated ‘Oustanding’ by Ofsted, so there is a great range to choose from in the eyes of prospective tenants.
Are there healthcare facilities in the area? Some prospective tenants may not wish to be located too far from health facilities, whether from working there, requiring care themselves or having loved ones in them they wish to be close to. Consider your proximity to hospitals and healthcare facilities for certain types of tenants, particularly nurses and doctors. The three main hospitals in Newcastle are the Freeman Hospital, Great North Children's Hospital and the Royal Victoria Infirmary.
Are there any centres of excellence? Whilst not entirely crucial, having a centre of excellence within a reasonable distance can help to secure tenants who are looking to grow their skills and abilities. There are a number of Centre's of Excellence in and around the Newcastle area, including the Excellence Training Den (ETD - Newcastle), SME Centre of Excellence and the Life Science Centre.
What is the tourism sector like? Whilst it is important to ensure there is a population base in place to fill your properties, it is equally important to invest in areas with great income from tourists. This in turn goes into the pockets of the area for development and your prospective tenants for income. Investing in areas with little tourism could mean little future development.
There are lots of things to see and do in Newcastle...far too many to mention in this blog, so check out Tripadvisor and see for yourself THE 10 BEST Things to Do in Newcastle upon Tyne - 2022 (with Photos) | Tripadvisor - Must See Attractions in Newcastle upon Tyne, Tyne and Wear
Has Government funding been provided for any regeneration projects? It is important when investing in an area to do so where investment is possible as a result of Government funding. This allows you to invest where regeneration is guaranteed which is attractive to prospective tenants in the area or looking to move to it. As part of the the European Structural and Investment Funds 2014-2020 programme, Newcastle has seen a number of funded projects, including The Biosphere; a fit-for-purpose laboratory and office building dedicated to life science innovation, research, development, and commercialisation.
Gentrification – Where are the trendy/up-and-coming amenities opening? In an era where the younger generations spend more time Instagramming their food and drink than consuming it, gentrification has become the answer to meet this demand. It is important to establish whether or not your chosen investment area is catering to a broad range of prospective tenants with independent businesses as well as chain stores, bars and restaurants. Areas particularly popular with students in the Newcastle area are Jesmond, Sandyford, Heaton, Shieldfield and Spital Tongues...as well as the City Centre itself.
Infrastructure investment and where it can be found.
Infrastructure is key to the functioning of an area, and infrastructure investment is crucial to cater to developing opportunities, enticing new employers to the area, and sustaining the population. It is crucial to invest in areas where the pre-existing infrastructure is able to cope with development plans also in place.
The Quayside Arena is a £260 million development anticipated to open in 2024; a 12,500-capacity arena nestled between the Sage and the Baltic, a conference centre, and a hotel – plus new bars, restaurants, public space, and walkways along the Quayside. Developments such as this not only create jobs, but contributes to the local economy and drives demand to the area - all excellent foundations for investing in property for.
Can residents afford the rent? When analysing areas to invest in, one of the most important factors is the affordability of prospective tenants. If tenants aren’t able to afford your targetted rents, then your void periods will speak for themselves.
The median rent for properties in Newcastle at the time of writing this blog is £750pcm. For prospective tenants to be able to pass referencing on properties of this bracket, their gross annual income needs to be £22,500. The average salary of Newcastle residents at the time of writing is £35,500. This means that not only can tenants meet the median rental figure, but on average, they can afford monthly rental figures of £1183.33pcm.
As a general rule of thumb, you should always look to invest in areas where rental figures are within one-third of the median income of the population.
Is Newcastle a place where residents choose to live? Absolutely! And if you invest in areas where residents are happy to live and decide to settle there, then you have a higher chance of securing long-lasting tenancies and a better ROI.
What are the crime rates? Investing in crime-riddled areas poses many risks, including prospective tenants not wanting to live there, and potential anti-social behaviour and damage to your property.
Newcastle’s crime rates have fluctuated over the past decade, with no clear predictable trend. In 2018, there were 42,628 crimes reported and 31,890 crimes reported in 2021, a drop of 25 per cent. This equates to 111 crimes reported per 1,000 residents (11.1 per cent). I generally find the safe median is to invest in areas where the crimes reported per resident percentage is less than 15 per cent.
Are there any flood threats? Floods can cause havoc with costly, long-lasting damage to property, and also have the potential for the tragic loss of life. In order to keep your property and tenants safe, you should look to invest in areas with minimal flooding risks.
Flooding is not a new concept to Newcastle, with the River Tyne flowing through the city centre. However, a report published by the council addresses awareness of the flood risks and sets out what measures are being taken to counter this threat.
What are Newcastle’s transport links, and is it a commuter catchment? Investing in an area with poor options for commuters can close off a vast portion of prospective tenants.
Whilst working from home has become a greater trend over recent years, there is still a need for excellent transport links. Newcastle thankfully has not neglected this need, and features excellent connections across the UK, reaching as far north as Aberdeen and as far south as Penzance.
I cannot stress enough the importance of due diligence when investing, whether that be in an individual property or an area to build a portfolio.
Any area, such as Newcastle, that covers the points I’ve just discussed, provide an excellent market with healthy demand which makes excellent foundations for your property investment strategy.
If you’d like information on investing in Newcastle or solidifying your own due diligence in your investment strategy, please feel free to contact me.
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