The Ministry for Housing, Communities and Local Government report on seaside towns portrays a gloomy picture of coastal regions. Whilst citing that these towns have high deprivation levels, an outward migration of young people and poor-quality housing, my experience of property investment in the regions tells a very different story.
The South West is renowned for provoking thoughts of sleepy villages, tourism, sandy beaches, surfing and cream teas. However recent residential investment deals have shown that there is more to this part of the country than meets the eye. Comprising of eight counties and a population of approximately five million people, the South West has become an increasingly attractive location for investors than the report alludes to and provides a compelling case for residential investment.
Its strong student market, demand for second home ownership, premium short holiday lets and traditional AST lettings, all coupled with the potential of decent yields and capital growth make it an appealing location for investment. The sale of Ansteys Court, Torquay (a freehold block of nine flats) attracted local, national and international interest, demonstrating the demand for well-located seaside residential investments.
It is clear that investors view the South West as having a strong rental market. The area boasts the highest number of retired people in comparison to any other UK region, being home to 19.6% of the UK’s retirees. Additionally, the South West hosted nearly 21 million tourists in 2016 with visitors staying for an average of eight nights. These trends have helped to drive demand for traditional Assured Shorthold tenancy lets and premium short holiday lets.
The sale of The Crescent, Newquay, a purpose-built block of 27 flats with sea views, was purchased just shy of a 9% gross yield and afforded the opportunity for AST lets and short holiday lets (and a traditional exit route of a piecemeal disposal of each of the flats).
The sale of Aqua Blue, Newquay attracted local, national and international interest and was ultimately sold under the hammer in an Allsop auction room. Despite physically requiring some TLC, the gross yield of 15.5% was enough to secure diverse demand. Interested investors cited various strategic plays – a piecemeal disposal, premium short term lets, traditional assured Shorthold Tenancy lets or a tie up with a local housing association. The 34 apartments successfully sold under the hammer in February this year for £1.675m to a private property company.
In May 2016 St Ives famously held a vote on the ban of the development of second homes. The vote received an 83% majority in favour of the ban and the High Court subsequently ruled that the ban did not breach human rights. Since this decision, both Mevagissey and Fowey have voted to include similar proposals within their draft neighbourhood plans. In Fowey, second homes account for a third of all properties. If this restriction comes to fruition, it will no doubt lead to an increase in values. Allsop recently sold a purpose-built freehold block comprising 21 flats in the town at a 4.66% gross yield (based on an estimated rental value). Is there an argument that this investor knows what impact this will restriction will have…?!
Whilst writing on the above, it would be remiss not to mention the incredibly strong student market in the South West. Commentary on towns such as Bath, Bristol, Exeter, Plymouth (and the list goes on) is very well documented. In our experience, we have no reason not to agree with the sentiment that more student operators are looking towards this part of the world. This was reinforced by the sale of a freehold block comprising 71 ensuite student beds in Exeter.
From the various deals that we have completed in the South West, it is clear that there is good demand and appetite for residential investment in this part of the country. Whilst there is evidence to support reports of economic deprivation in the region’s coastal towns, we have not experienced any obstacles in this respect when marketing investments in the area. Given the opportunity, the region’s large number of tourists provide a stable domestic market and good demand for second homes. Investors have a range of strategic options available should they wish to invest in the area. It is this diversity that is likely to ensure that the region remains more than just a holiday spot to property investors.
If you would like to get in touch with James, please contact him:
firstname.lastname@example.org or +44 (0)20 7344 2637