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Insight & Opinion

Why property investors should opt for Cardiff over London

Author: Gemma

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One of the most interesting trends to have emerged in the UK property market in recent years is the gradual shift in power away from the traditional dominance of London and south-east England, towards regional towns and cities across the country.

This has opened up some exciting new opportunities for investors, particularly those who are put off by the higher-than-average property prices in the capital and surrounding areas.

One destination that is attracting strong interest at the moment is Cardiff, a city that has a lot going for it where property investment is concerned. Here are some of the key reasons why the Welsh capital is seen by many as a compelling alternative to London.

Strong price growth

The UK property market has witnessed a clear trend in recent years where house prices are concerned – a distinct slowdown in London and the south, offset by ongoing growth in values across various regions.

This was emphasised in the latest Hometrack UK Cities House Price Index, where Cardiff was ranked fourth, having seen year-on-year price growth of 4.1 per cent in August 2019. This was an improvement from the 3.9 per cent increase recorded a year earlier.

In London, meanwhile, prices rose by only 0.2 per cent in August this year, having declined by 0.8 per cent a year earlier.

Despite the recent sluggishness, the English capital continued to have an average house price (£483,800) that was more than double that of Cardiff (£211,800). This highlights the potential for investors to secure a combination of relatively low entry prices and strong potential for capital growth in the Welsh city.

The Office for National Statistics (ONS) provided further insights into current dynamics in the UK housing market with its own figures for August, which showed that prices in London dropped by 1.4 per cent – the biggest annual fall of any region.

However, Wales was one of the key contributors to the UK’s overall year-on-year growth of 1.3 per cent, which surpassed the 0.8 per cent recorded in July.

ONS head of inflation Mike Hardie said: “Annual growth in UK house prices showed a moderate pick-up in August, although it remains below the increases seen throughout 2018.

“Wales saw the strongest growth, with prices continuing to fall in London and the south-east.”

The bigger picture

House price growth is just one of the encouraging trends taking place in the Cardiff property market at the moment.

Investors can also feel positive about developments underway in specific segments, such as student housing, which has shown strong performance all over the UK in recent years and holds great potential for growth in Cardiff.

One of the main reasons for this is the current undersupply of purpose-built student accommodation (PBSA), which means demand for well-equipped, well-located living space is high, particularly among international students. This strong need for dedicated housing fuels regular yields for investors and reduces the risk of void periods.

According to figures released by Knight Frank earlier this year, universities and direct-let operators current supply 16,794 rooms, for a student population of more than 37,800. This means more than half of people studying in Cardiff can’t access PBSA and have to live in houses of multiple occupation (HMOs).

The BBC recently reported on the sub-standard quality of many HMOs in the area, dozens of which fall below licensing standards.

This underlines the need for bespoke projects such as the recently unveiled Opto Student Cardiff, a development of self-contained studio apartments that will be delivered furnished and fully managed.

Looking beyond particular sectors and asset classes, Cardiff as a whole has been through an exciting regeneration in recent years, which bodes well for the future of the city and its property market.

As Leah Mullin of Knight Frank told the Telegraph, the city centre has “totally changed since 2010”.

“After little development for a decade, now one million sq ft of commercial space has been delivered, the first build-to-rent schemes are coming out of the ground and there’s clearly pent-up demand,” she said.

Business and the economy

London has long been viewed as the business and economic heartland of the UK, and it goes without saying that the capital continues to offer excellent opportunities for entrepreneurship, corporate growth and career development.

However, it’s also clear that London is a highly competitive and saturated market, with countless start-ups and growing companies competing for space and customers.

Cardiff offers greater scope for small, ambitious businesses to expand and evolve, and support is being made available to support this growth.

The local council this month published a new economic strategy designed to “supercharge” the economy and boost opportunities in the east of the city. The plan focuses on key areas like:

  • Public transport infrastructure
  • Regeneration
  • Connectivity
  • Developing new ‘green’ industries

Other recent developments include the launch of the Cardiff Capital Region (CCR) Industrial Economic Growth Plan for South-East Wales, which aims to drive future productivity and prosperity across the region.

Introducing the initiative, Frank Holmes, chair of the CCR’s Economic Growth Partnership, said: “It advocates global connectivity by investing in first-rate transport systems, housing, digital infrastructure and employable skills in order to exceed the competitive objectives of job creation, improved GVA [gross value added] and leveraging evergreen investments.”

Local transport and infrastructure developments – such as the £50 million South Wales Metro Plus programme and the removal of tolls on the Severn bridges – will provide further impetus for business and economic growth in Cardiff, supporting and strengthening growth in the property market.

A rapidly expanding population

It can be hugely reassuring for property investors to know the population of their chosen destination is set to increase in the coming years. After all, a higher population means stronger demand for housing, which fuels the private rental market and drives yields and capital growth.

This is another area where Cardiff has bright prospects. According to Savills, the Welsh capital will witness population growth of 25 per cent by 2034, a rate that exceeds all other UK ‘core cities’, including London.

Furthermore, Oxford Economics forecasts that employment will grow by 12 per cent by 2030, compared to the UK-wide average of eight per cent.

More people and more jobs in Cardiff are particularly encouraging signs for property investors who want to secure the best possible returns, in terms of both capital growth and rental yields.

Investing in Cardiff

To find out more about this great city and everything it has to offer, you can download Experience Invest’s new Cardiff investment guide, or contact us to discuss opportunities available right now.

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