Leicester is one of the most attractive residential property investment markets in Britain. That’s thanks to a thriving economy, rising inward investment, new job creation and steady growth in its domestic population. As a result, investors’ returns – in terms of gross yields and capital values – have often ranked amongst the best in the country.
Favourable market conditions have been driven partly by significant economic expansion. By 2030, the city’s economy is forecast to increase by +£5.7 billion per annum – a trend that should also see large-scale business formation and a large boost to employment. In its economic strategy covering the period to 2030, Leicester and Leicestershire Economic Partnership (LLEP) notes that it expects the regional economy to grow to over £30 billion and to sustain over 568,000 jobs.
With the advent of transformative schemes including the East Midlands Freeport, such forecasts seem decidedly credible. Other contributing forces are likely to include the growth of the city’s £650 million visitor economy, and further growth in the academic sector. Here, three universities are helping to drive research, innovation and a shift to higher-value industries.
Importantly, Leicester is also a city in which good housing is in short supply. By 2050, local planners expect to have to accommodate around 187,000 new households but, at current building rates, that’s very unlikely to happen. Consequently, now and for the foreseeable future, Leicester looks set to remain very much an investor’s market.
Sources:
ONS, October 2024
PropertyData, October 2024
Another reason to expect strong growth in rental demand and capital values is that average earnings are likely to keep rising faster than the rate of inflation. The UK as a whole has seen earnings outpace the cost of living for many months now, and that has been helping to ease affordability pressures. That, in turn, has left householders with more to spend on their housing aspirations – a factor that has helped to support rising rental values and asking prices.
Looking ahead, that seems set to continue in Leicester, thanks to the growth of numerous high-value, knowledge-based industries. Examples include:
Investors with an interest in Leicester will want to satisfy themselves that the city’s economic growth is sustainable. That seems very likely, given the scale of inward investment. The city council recently reported that more than £2 billion of private and public sector investment has already been made, or proposed in Leicester.
Below are listed some examples of recent developments and regeneration projects that are setting the scene for rising employment and local business growth.
Two universities operate in Leicester itself. The largest is De Montfort University, which supports nearly 26,000 students, while over 20,000 study at the University of Leicester. Both also sustain large workforces of academic, managerial and administrative staff, as well as a network of supply chain partners.
Their most obvious impact on the property investment market is the demand they create for student and workforce accommodation. As a direct result of their presence, over 50,000 people need homes in and around the city, and that’s before taking account of Loughborough University, which has a student body of around 19,500 and lies only 15km to the north.
The universities are also important local investors, funding numerous construction projects and nurturing the growth of new spin-offs and high-value enterprises. They add value to the economy by hosting business incubator units and bolstering the R&D efforts of high-growth SMEs, as well (of course) as producing thousands of talented new graduates every year.
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Leicester has an obvious appeal to property investors. It can point to a strong economy, rising employment, a trend towards better-paid roles and a growing population. And all this coincides in a city where demand for housing is exceptionally strong but stocks of good quality accommodation are low.
Investors can therefore be confident of reliable rental demand and rising capital values. Fortunately, however, average prices are lower here than in many other parts of Britain. Lower-than-average property costs translate into better prospects for higher yields and, potentially, more room for further price growth.
Future growth seems more than credible, in light of ongoing investments and projections for increasing population and employment. Leicester really is showing all the right market indicators for investors and so it’s likely to remain one of the country’s most dependable and rewarding markets.
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