Should I invest in a rental property in Norfolk in 2023?
We’ve faced complex challenges over the last several years, from Brexit to Covid to the war in Ukraine. These issues have had knock-on effects, including supply chain delays and increased cost of living. The increased cost of living has impacted both consumers and organisations meaning everyone must be more restrained with their spending.
The one area of certainty during these difficult times has been the property market. According to data from bricksandlogic the average sale price in the East of England has increased by 22.1% over the last five years and has even continued to grow over the previous few months – with sale prices still rising by 1% in the past six months.
There has been similar growth in rental values, with rents increasing by 25.2% in the East of England over the last five years and 3.8% in the last six months.
We are still experiencing the effects of the last few turbulent years, so we expect the rise in house prices to plateau in 2023. Increased mortgage rates, less tax relief, and a host of challenges in the macro environment are likely to lead to continued rent increases this year to ensure Landlords see a healthy return on investment. Using data from bricksandlogic I have highlighted several factors to consider while investing within Norfolk in 2023.
Over the last three years, the areas with the highest rental growth are Norwich, Broadland, and North Norfolk.
Norwich
In Norwich, the most significant growth has been seen in the city suburbs, especially to the South and West of Norwich, which benefits from links to the University of East Anglia and the Norfolk and Norwich University Hospital. These properties have also shown a good return on capital investment over the last three years, with house prices increasing by around 24%.
You can currently purchase a three-bedroom townhouse in Costessey for a price in the region of £280,000 – a realistic rental value for a property like this would be in the region of £1,200 – a yield of 5.14%. Many new or recently built properties in this area still have all or part of their NHBC warranty, which would further reduce overheads while maintaining the rental property.
Thorpe St Andrew is another popular city suburb with excellent city links and a range of local amenities. Average rents have increased in this area by around 25.2% over the last three years, the average rental value in the area is around £1,000 vs an average house price of £269,000 – resulting in an average yield of 4.4%.
Rents in the city centre have not enjoyed a similar level of increase due to the Covid pandemic leading to people moving into the suburbs and countryside but footfall is now returning and areas such as the Golden Triangle and the up-and-coming ‘Silver Triangle’ (NR3) are becoming popular locations for prospective tenants. There is currently a two-bedroom mid-terraced property on the market on Gertrude Road for £220,000, an estimated rental value in the region of £850 would return a yield of 4.6%.
Broadland
This area is very popular with families; there are plenty of towns with good local amenities and schools. Aylsham is one of these, it has grown substantially with new builds over the last five to ten years due to its attractive town centre, strong transport links to both the coast and Norwich and a range of amenities. The average house price in this area is £373,000 and the average rental value is £1,124. Despite the high average house price, a reasonable three-bedroom semi-detached property attracts around £270,000. This type of property would achieve an average rental value of £950, a yield of 4.2%.
Brundall is another popular location and its proximity to the A47 makes it an ideal town for commuters. The average house price in Brundall is £384,000 and the average rental value is £1,285. There are plenty of available options for an investment purchase in Brundall. There is a range of older properties on the market in need of modernisation as well as several new build properties which are ready to let out.
North Norfolk
The coastal hotspots of Cromer and Sheringham have very buoyant rental markets, with a shortage of rental property and a high level of tenants looking to live in the area. There are many purpose-built apartments available for purchase in Cromer. These properties generally return a healthy rental value. For example, there is currently a two-bedroom apartment for sale on St. Marys Road for £160,000. The likely rental value for this property would be in the region of £750, returning a yield of 5.63%.
Sheringham is popular with an older demographic and bungalows are in high demand in this area. Two/three-bedroom bungalows attract rental values in the range of £900 to £1000. Although the high purchase price of these bungalows reduced the yield, the tenancies usually provide a source of long-term, reliable income.
If you would like to know more about a rental investment opportunity or a property you already own and are considering letting out, give us a call at 01603 751555 or email letting@watsons-property.co.uk and we will be happy to guide you through the process.
Norwich and Norfolk Lettings and Property Management
*Statistics courtesy of bricksandlogic
