North East of England: a property investment hotspot

Affordable property prices, strong rental demand and exceptional yields are just some of the reasons that property investors are continuing to hone in on the North East.

When it comes to choosing the best location for your property investment, a number of factors and preferences are likely to come into play. For some, investing in property relatively close to where you live is a priority, while for others it purely comes down to the numbers; and it is these investor types that tend to opt for places like the North East.

However, the region has much more to offer than what you might see on paper. Home to arguably some of the country’s most beautiful stretches of coastline, a rapidly improving economy, growing employment prospects, and some of the best universities in the UK, the North East should be a top consideration for its investment potential.

North East: the numbers

For property investors keen to crunch the numbers, the North East’s most impressive accolade as an investment hotspot at the moment is that it was recently named as the UK’s highest-yielding region.

The average gross yield there is 7.2%, according to Zoopla’s latest Rental Market Report for September 2023 – and, of course, certain areas and property types within the region will garner even more impressive rental yields for landlords, we consistently offer opportunities at between 8-10% gross yields.

Now more than ever for investors and landlords, keeping a strong focus on potential rental yields is important. This is because property prices are no longer accelerating at the rate they had been between 2019 and 2022, and also because monthly mortgage costs have ramped up for many landlords due to rising interest rates. If you’re looking to make an income through your rental returns, keeping an eye on yields is a good place to start.

According to Zoopla, the average buy-to-let in the North East costs just £109,000 to buy, while the average monthly rental income is £649. If you look more closely at the likes of Sunderland, Middlesbrough and Hartlepool, gross yields average anywhere between 8.01% and 8.39%.

As a comparison, London sits at the bottom of Zoopla’s yields chart, with average gross yields for landlords of just 4.7%. This comes from the fact that the average rental property there costs a huge £522,000 to buy, and brings in £2,053 per month in rent. For many investors, the exceptionally high cost of purchase in the current climate is off-putting.

House price trends

Being mindful of what is happening in the market in terms of house price trends is important, although monthly fluctuations don’t necessarily give an accurate representation of the bigger picture for those who are entering into property investment as a long-term venture. Over a number of years, any sensible property investment should have gained in value.

At the moment, it is no secret that house prices are stagnating across the UK, although there are a number of regional differences. In recent house price indices, such as the one published by Nationwide for September, the North of England (including the North East) is outperforming the rest of the country when it comes to the annual rate of change, registering a 3.9% year-on-year fall compared with the UK average of -5.3%.

Gearing up for the New Year

December and January are often a popular time for househunters who may want to get the ball rolling on their next purchase ahead of the ahead of or early in the New Year – and this goes for homeowners as well as investors.

In the North East, where demand for property continues to outstrip supply, and where property prices are appealingly affordable, this is expected to provide the region with a buffer against the adverse external factors that are affecting other parts of the housing market, such as higher interest rates.

The property investment landscape in the North East is therefore an extremely promising one at the moment, and we are continuing to see a high level of interest from investors who are keen to position themselves ahead of the long-term trends expected in the market.