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Investing in Cardiff

Investing in Cardiff offers property investors plenty of scope for rising rental yields and capital growth potential. Here we examine the recent trends that point to a bright future for local business and the economy in the Welsh capital.

  • Last updated: Mar 2020

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Investing in Cardiff offers property investors plenty of scope for rising rental yields and capital growth potential. Here we examine the recent trends that point to a bright future for local business and the economy in the Welsh capital.

Welcome to Cardiff

Located in South Wales, Cardiff is the Welsh capital and is the financial and commercial hub of the region. Cardiff is home to the 6th largest retail centre in the United Kingdom, attracting over 20 million visitors each year and contributing £1 billion to the local economy.

An influx of investment has seen Cardiff transform into the vibrant, cosmopolitan city it is today, with the revival of the Cardiff Bay, the opening of the Principality Stadium and the redevelopment of Central Square playing an important roll in the city’s regeneration.

Cardiff has a lot going for it as far as property investment is concerned, including a strong student market and improving infrastructure links to the rest of the UK. Experience Invest took an in-depth look at the potential of the Welsh capital for property investors in a recent investment guide.

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What you need to know about
investing in Cardiff:

  • Where is Cardiff?
    Cardiff is the closest capital to London and is just 2 hours by train from the city. Cardiff boasts excellent rail, road and air travel links and is one of the UK’s best connected cities.
  • How large is Cardiff?
    Cardiff is the largest city in Wales and is home to 474,187 people. Overall Cardiff is the UK’s 11th biggest city.

    The city’s population is expected to increase by 25% by 2034, with the number of people living in Cardiff rising at a faster pace than all other UK cities (including London).
  • Is there a demand for property in Cardiff?
    The Welsh capital is witnessing a number of positive trends as far as business and the economy are concerned, which is highly encouraging for those who are considering investment opportunities in Cardiff.

    The recent evolution of the business environment and the economy in general has led to a wider demand for rental property. These particularly positive developments, coupled with one of the UK’s fastest rising student populations, make the city ideal for buy to let investment.
  • Does the city require student accommodation?
    As a UK capital city, there is plenty of diversity within Cardiff’s property market which has allowed alternative asset classes, including Purpose Built Student Accommodation (PBSA), to emerge as a robust option for developers and investors.

    The city itself is home to three internationally recognised universities and boasts a student population of roughly 40,000 people. For investors considering investing in Cardiff, student property offers higher than average rental yields when compared to other popular university cities.
  • Cardiff inward investment
    There are many reasons why Cardiff is a firm favourite for investment opportunities and according to Savills, the is a city which is “on the verge of a sustained period of growth”.

    An estimated £1 billion investment into the city’s transport network will revamp the city’s rail, bus, cycling and road networks over the next 10 years and will improve the city’s connectivity with the rest of the UK.

    Also, a plan to create a new Western Powerhouse, which will promote a cross-border partnership between seven cities including Cardiff, Bristol and Newport, is set to improve the region’s position within the wider economy. If approved, inward investment into the scheme could see the region become a £1.21 billion economy. You can read more about Cardiff inward investment here...

An expanding economy

In February this year, the Cardiff Capital Region (CCR) Economic Growth Partnership announced its Industrial and Economic Growth Plan for South-East Wales, the aim of which is to boost future productivity and prosperity across the region.
The initiative will focus on various opportunities and challenges over the next 20 years, including skills development, delivery of both digital and physical infrastructure, and ways to encourage innovation and entrepreneurship.

Councillor Andrew Morgan, chair of the CCR cabinet and leader of Rhondda Cynon Taf Council, said the plan was particularly welcome because it goes beyond just creating jobs.
Councillor Andrew Morgan, chair of the CCR cabinet and leader of Rhondda Cynon Taf Council, said the plan was particularly welcome because it goes beyond just creating jobs.
It looks at the four combined aspects that will help us grow the economy: housing, transport, skills and jobs, and in turn, that will bring about economic benefits across the region.
Clear evidence of the growth currently taking place in Cardiff was provided in the UK 2019 Vitality Index from Lambert Smith Hampton (LSH), which put the Welsh capital ninth on a list of towns and cities best-placed to support future economic expansion.

This is the first year Cardiff - or any town or city in Wales - has made an appearance in the top ten. The city also achieved a bigger jump in its ranking than any other member of the top ten, rising nine places from its previous position of 18th.

Top UK city for
business growth

The creation of the CCR City Deal back in 2016 is set to have a number of positive ramifications for businesses in the coming decades, including an additional £4 billion of private sector investment and up to 25,000 new jobs.

It will build on the area's key industry strengths, its current skills base and its three universities, which are also major factors in the appeal of the local student property market.

Earlier this year, the CCR announced a new effort to support business development with the launch of a graduate scheme to enhance productivity and innovation. A one-year pilot of the scheme will help companies in creating 50 graduate internships for 2019-20. The aim of the project is to broaden the skills base available to employers in Cardiff, while demonstrating the opportunities available to highly qualified and talented graduates in the area.
Kellie Beirne, director of the CCR, said: This graduate scheme enables us to support businesses within our region and encourage higher-skilled employment across the private sector, particularly in some of the investable sectors that were identified in our Industrial and Economic Growth Plan, including financial technology, transport engineering and life sciences."
The increasing strength of the private sector in Cardiff was underlined in a 2018 report produced by the Lloyds Bank National Business Awards, which reflected the views of 850 senior corporate decision makers.

It showed that Cardiff is viewed as one of the top five UK cities for business growth, with the availability of talent cited as one of the strongest factors in its favour.

The study also revealed the Welsh capital has a higher proportion of 'gazelle' firms (high-growth companies that have more than doubled their revenue over four years) than any other UK city.
The study also revealed the Welsh capital has a higher proportion of 'gazelle' firms (high-growth companies that have more than doubled their revenue over four years) than any other UK city.

A globally connected city

Before committing to a location, one of the common considerations for investors is the quality of infrastructure and transport links connecting the area to other key cities at home and overseas.

This is another area where Cardiff has taken some big strides forward, particularly in the past year.

As far as local travel is concerned, the city will benefit greatly from the £50 million South Wales Metro Plus plans announced earlier this year, which outline potential new rail links, transport interchanges and park-and-ride services, among other proposals.
Councillor Huw David, chair of the CCR Transport Authority and leader of Bridgend County Borough Council, said: Metro Plus provides the potential to develop a whole programme of activity that contributes to, complements and enhances Metro and mobility delivery in the region.engineering and life sciences."
Looking slightly further afield, people travelling in and out of Cardiff will soon be able to reach central London in just one hour and 42 minutes, thanks to a faster service being introduced by Great Western Railway in December.

Initially due to run at peak times in the mornings and evenings, the connection will shave 17 minutes off the current journey time by cutting out stops at Swindon and Reading on the way to London Paddington.
Initially due to run at peak times in the mornings and evenings, the connection will shave 17 minutes off the current journey time by cutting out stops at Swindon and Reading on the way to London Paddington.
And it's not just within the UK that Cardiff's travel links are steadily improving. Cardiff Airport hosts three daily flights to Amsterdam, operated by Dutch airline KLM, which provides ongoing connections to destinations all over the world from its hub in the Netherlands.

Qatar Airways also flies from Cardiff, providing a direct daily service to Doha. This could be a particularly convenient option for people based in the Middle East, which has traditionally been a key source of international investment in UK property.

Cardiff property market report

Despite the rising number of people living in the Welsh capital, Cardiff’s housing market has not experienced the resurgence of new-build properties witnessed in other core UK cities.

Between 2017 and 2018, just 464 new homes were constructed in Cardiff. The number of properties delivered in Cardiff falls significantly short of the Local Plan target of 2,071.
Over the last five years, the rate in which housing stock has grown in the city has averaged at 0.3%. If the rate of construction continues at this pace, the city’s property market will be at risk of becoming severely undersupplied.

For buy to let investors, Cardiff’s housing market offers a relatively affordable entry level onto the UK’s property market. When compared to London, where the average house price is £483,800, Cardiff offers great value for money, with the average property currently standing at £211,400 (UK average is £221,100).
For buy to let investors, Cardiff’s housing market offers a relatively affordable entry level onto the UK’s property market. When compared to London, where the average house price is £483,800, Cardiff offers great value for money, with the average property currently standing at £211,400 (UK average is £221,100).
Four areas in Cardiff are featured in Totally Money’s 10 best buy to let postcodes in Wales, with the city’s central CF10 postcode a firm favourite for investors.

The city also offers strong capital growth potential. Since 2008, property values in Cardiff have climbed by 21%. In 2018, the city witnessed an impressive 6.1% rise in the value of property, well above the 1.9% recorded in England and Wales.

Cardiff’s property market offers property investors plenty of scope to secure capital growth potential and strong yields.

Thriving Student property sector

  • Around 40,000
    students
  • Current shortage of
    21,016 managed beds
Known for its reputation for academic excellence, Cardiff is one of the UK’s most popular university cities. The variety and the quality of courses available at the city’s three higher education institutions - including the only Welsh member of the prestigious Russell Group - attracts students from all corners of world.

Boasting a student population of around 40,000, the number of people studying in the city continues to climb, with the demand for courses significantly outstripping supply. In the run-up to the January 2018 deadline for entries, UCAS recorded 55,105 applications to Cardiff’s universities however, just 12,955 were accepted.
The overall quality of the higher education establishments in the city is reflected by the city’s high student satisfaction rate of 77.8%. Named the UK’s most affordable student city in Natwest’s 2019 Student Living Index, affordability is another factor which has contributed to the city’s success.

The Welsh capital is also home to one of the highest concentrations of international students, with 26% of the total student population enrolling from overseas. Cardiff also has a larger than average graduate retention rate, offering a range of employment opportunities to students hoping to kick-start their careers in the city.
Cardiff has good-quality universities but low PBSA stock (Knight Frank)
  • Fastest rising student rental rowth in the UK
  • 26% of all students from overseas
  • UK’s most affordable student city
  • High retention rate: 41% of students remain in the city
Cardiff’s unique blend of high-ranking institutions and affordable capital city living appeals to students and investors alike. Student accommodation investment in Cardiff currently offers some of the highest rental yields when compared to other UK university cities, largely due to an overall undersupply of high-quality PBSA developments across the city.

In February 2019, Knight Frank reported a shortage of 21,016 university operated of privately managed beds across Cardiff.
With over 50% of the city’s student population unable to rent a room within a student centric building, many students opt to live in Homes of Multiple Occupation (HMOs). A recent freedom of information request submitted to the BBC has shown that Cardiff’s HMO stock falls below licensing standards. Issues include fire risks, damp and mould and vulnerability to intruders.

The lack of safe and secure PBSA in Cardiff means that students are unfortunately paying a premium to stay in substandard HMO across the city.
The lack of safe and secure PBSA in Cardiff means that students are unfortunately paying a premium to stay in substandard HMO across the city.
Developers like Opto Property Group, who are working alongside the council to address supply issues, are creating high-quality student investment property with premium facilities and contemporary living spaces.
Projects like Opto Student Cardiff are designed to embrace co living by encouraging students to build their own community through living, studying and socialising within the development.

Addressing the lack of student investment property in Cardiff will unlock the potential for reliable rental yields for many years to come.
Addressing the lack of student investment property in Cardiff will unlock the potential for reliable rental yields for many years to come.

What does the future hold for Cardiff’s property market?

Cardiff is set to be at the centre of a significant period of growth over the next 20 years, with employment and population projections placing it as one of the UK’s fastest growing cities.

This rapid expansion over a relatively short period of time will put a strain of the city’s already stretched housing market. Developers and investors are currently presented with a prime opportunity to capitalise on the demand for a range of property to suit the city’s buoyant rental market.

As with all progressive capital cities, the solution for Cardiff’s housing market lies within new-build developments which will stand the test of time. Developers entering the market must consider how their projects will help to shape this young city’s future and provide high-quality housing that will deliver a long-term positive impact.

With such a wide range of factors in its favour - from business and the economy to transport and infrastructure – investing in Cardiff is an opportunity that property investors can't afford to ignore.
Student accommodation
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Opto Student Cardiff
Set to become the No.1 student
complex in the city
  • 7.5% NET return per annum for 3 years
  • Delivered furnished and fully managed
  • Excellent city centre location
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