Spotlight on Anglesey, North Wales

Often, when we highlight an attractive property investment destination, it’s on the strength of substantial economic growth and investment in its immediate surroundings. There are good reasons for this; economic factors such as employment growth and average disposable incomes tend to correlate closely with capital growth, rental prospects and average yields.

However, broad economic growth is only one driver of a healthy property market. In some locations, it’s the strength of a single sector that sustains it, and an excellent example of this is Anglesey in North Wales. In September 2020, Rightmove published house price data showing that average values in parts of the island had risen by as much as 21.5% since 2017.

Anglesey & Tourism

Here, the principal driver of rental demand is, of course, the island’s £310 million tourism industry. Like other well-known UK locations such as the Lake District, Blackpool, Whitby or Scarborough, Anglesey has an economy that depends on visitors for a large part of its income. In 2020, a year dominated by the impacts of the Covid-19 pandemic, that dependence might have been considered a risk but, in fact, the island has fared extremely well.

During the summer, when restrictions on international travel were causing massive upheaval, there emerged a strong trend to take holidays in the UK. ‘Staycations’ became a huge phenomenon, which saw near-record levels of occupancy in both cities and coastal resorts, and an accompanying hike in average short-term rental prices.

In October 2020, Wales returned to lockdown, and this will doubtless lead to another period of pain for local tourism businesses. However, the overall trend has been one of rising house prices. Moreover, with growing hopes for a working vaccine by the first half of 2021, there are good grounds to believe that tourism will return to strength in 2021.

The visitor economy is in North Wales is built on very strong foundations. Earlier in 2020, Business News Wales reported that “the Covid-19 crisis hit at a time when the visitor economy was booming. There were record levels of private and public sector investment, while the annual level of spending by tourists had risen to an all-time high of £3.241 billion and the number of visitors rocket(ed) to 30 million a year.”

The general trajectory, then, was clearly upward and once the coronavirus ceases to be such a severe threat, it’s likely that equally good trading conditions will return. The longer-term outlook for investors remains very encouraging.

Property Prices

There’s no doubt that there is strong confidence in the island’s housing market. At the time of writing, Rightmove’s most recent figures show that two locations in Anglesey made the top 10 for capital growth in Wales.

Ranking at number 3 in the national table, Llanfair Pwllgwyngyll saw growth of 21.5% between 2017 and 2020. Average values climbed from £208,941 to £253,882. Similarly, Holyhead appeared in 9th place, producing capital returns of 20% over the same period. (Source: Daily Post / North Wales Live.)

Across the UK, house prices took almost everyone by surprise. Most had been predicting big losses as a result of the pandemic but, in the event, prices in some areas rose by their fastest rates since before the 2008 global financial crisis. Some of this growth has been ascribed to the release of pent-up demand after the April 2020 lockdown. The surge in market activity probably also owes a great deal to the temporary suspension of the Land Transaction Tax, the Welsh equivalent of the Stamp Duty holiday in England.

Regardless of the reasons, there is no doubt that prices have been moving in a favourable direction for property owners. For example, October house price data from Home.co.uk finds that across all property types, average values in Anglesey rose by 14% year on year. Similarly, LiveYield lists the island in its UK top 3 for 1-year capital growth, reporting that values have risen there by a heady 22.4% in the 12 months to October 2020.

These are remarkably impressive headline figures. However, it’s important to recognise that the island is not densely populated and the relatively small number of property transactions can produce some quite extreme-looking statistics. To illustrate the point, there have been so few sales of flats in 2020 that Home.co.uk feels unable to include that property type in its year-on-year figures.

What is clear is that average values have been rising at a very healthy rate, and that most commentators expect a relatively swift return to rising values once the worst of the pandemic is over.

For example, Savills’ Five-Year Mainstream Residential Property Forecast expects the average Welsh property to gain 22.3% in value by the end of 2024. Hamptons International expects slower growth UK-wide, but stills expects Wales to be one of Britain’s better performers. By 2024, it forecasts growth of 10.5% in Wales – a figure which only the North East (11.5%) is expected to exceed.

Rental Yields

LiveYield reports that across Wales as a whole, buy-to-let properties have been generating a mean gross yield of 4.4%, putting them in the middle rankings of the UK league table. Typically, rentals are now 2.5% higher than they were in September 2019. Looking more specifically at Anglesey, it combines rental income and capital growth to derive a total 1-year return of 16.5%, which earns the island a place in the top four property investment markets in all of Wales.

Anglesey: An Overview

Given its high-ranking performance, it’s perhaps worth looking in more detail at the social and economic forces that are helping to sustain Anglesey’s position.

Firstly, and most obviously, it is a very popular tourist destination. Its own native population is around 70,000, approximately 13,000 of whom live on neighbouring Holy Island, but every year, it welcomes around 1.7 million tourists. Much of the 673 kmisland is barely occupied and its population is spread quite evenly across a number of small towns. With no areas of high population density, such visitor numbers generally help to keep occupancy rates very healthy. They also help to sustain around 4,000 local jobs.

Anglesey is home to a host of attractions, including a well-known aquatic zoo, numerous ancient monuments, and Beaumaris Castle, which was built in 1295. But its greatest attraction is almost certainly its natural assets; a combination of open green spaces, beaches and the 200km long Anglesey Coastal Path.

While tourism is currently the most important economic sector, agriculture makes an important contribution, as does a deep-sea port at Holyhead. Its ferry port handles more than two million passengers every year and runs regular services to Dublin. This makes the island one of the most important gateways from Ireland into Wales and central England.

A Transport Hub

It might seem odd to regard an island as a transport hub – normally, that’s the preserve of cities in the UK heartland – but Anglesey acts as an important nexus for travel and freight. Not only does it have a well-equipped deep-sea port, it also hosts one of only two airports in North Wales. From here, passengers can travel to Cardiff on one of two daily weekday flights, and from there on to a host of international destinations.

The airport is located close to the A55 North Wales Expressway, which runs across the island before crossing the Menai Strait and connecting through to Chester and the main UK motorway network.

As is typical of a tourist-focused resort, Anglesey also has well established railway infrastructure. It boasts a total of six stations, all part of the North Wales Coast Line, and they offer connections to key destinations including London, Birmingham, Manchester and Cardiff.

Tourism in North Wales

Few would doubt Anglesey’s status as a popular tourist resort, but it makes little sense to consider it in isolation from the wider region. Much of North Wales is thriving tourism country, with miles of beaches, numerous busy resorts and a wealth of attractions and outdoor pursuits to be found just a few miles inland. Tourists staying in Anglesey can easily cross over into mainland Wales and enjoy all that the region has to offer.

In 2019, before the pandemic, North Wales attracted nearly 30 million visitors – a better result than any other region of Wales. Tourism is such big business here that it employs over 42,000 people. Some of the area’s most popular attractions include:

Anglesey makes an appealing base from which to enjoy the region and, with millions now being invested into the North Wales tourism offering, it’s a position that could become increasingly attractive to investors.

National 5-Year Tourism Plan

The Welsh Government has a 5-year economic plan for the national tourism industry. Published in January 2020 it’s titled Welcome to Wales, Priorities for the visitor economy 2020 to 2025. Key objectives include boosting off-peak tourism, increasing spending on overnight stays and giving Welsh destinations a greater share of the UK tourist market.

It’s supported by a £60 million fund, most of which is allocated to the Wales Tourism Investment Fund. This aims to support sustainable high-quality capital investment projects that deliver “year-round experiences that are good for visitors and host communities.”

The North Wales Growth Deal

Another important development is the North Wales Growth Deal, which was signed in November 2019. Worth over £1 billion, it will drive the growth of high value growth industries. Tourism is one of these but Anglesey is also poised to benefit from investment in green, sustainable energy.

Although the island’s tourism industry has clearly been enough to support a thriving property market, the introduction of a whole new industry could deliver a real transformation for investors. If current plans are realised, then Anglesey’s employment figures and economy could soon begin to rise very sharply indeed.

Sustainable Energy

Holyhead is more than just a port at one end of a ferry crossing. It is also providing the launchpad for a growth sector that could transform the fortunes of the region. Sustainable energy is increasingly being regarded as the next big growth market on the island. Already, it is home to three ground-based wind farm sites, but in recent years, its aspirations have been going offshore.

Back in 2015, Holyhead saw the launch of a £25 million tidal power project, led by the Swedish firm Minesto. Its trials in 2018 and 2019 were successful and now it is aiming to upscale operations and to establish a new manufacturing facility in Holyhead. In all, it has invested £32 million in Welsh renewables. Industry experts at Marine Energy Wales predict that its longer-term expansion of the Holyhead Deep project (achieving outputs of around 80MW) “would see further substantial inbound investment, job creation and supply chain opportunities.”

More recently, in April 2020, Marine Energy Wales published a report announcing that the tidal stream array demonstration project, Morlais, had signed up three new international turbine developers. Morlais is run by social enterprise, Menter Môn and reportedly has “the potential to become one of the largest tidal stream energy sites in the world.” Business News Wales wrote that “French firms SABELLA and HydroQuest as well as Spanish developer Magallanes (were) planning to deploy their devices on a commercial scale at the Crown Estate-designated zone off the coast of Anglesey.”

Speaking on behalf of Marine Energy Wales, Jess Hooper said: “This inward investment and commitment from international technology developers … highlights the significant potential that marine renewable energy brings to largely rural economies of areas such as Anglesey.”

The organisation’s State of the Sector 2020 Report describes the Welsh coast as a new marine energy engineering centre of excellence and notes that “tidal stream energy developers including Minesto and … the development of the Anglesey Tidal Demonstration Zone have contributed a total of £51.7 million of direct investment to the Welsh economy to date.”

The report also points to wind farm developments in the Irish Sea and suggests that “early mover advantage in a floating offshore wind market could create over 3,000 jobs by 2030.” It estimates that Anglesey has attracted £36 million of inward investment in and that, globally, the sector could be worth£76 billion by 2050.

The report also points to conscious efforts by local planners to capitalise on the island’s status as a centre of excellence, saying “Anglesey Enterprise Zone and the Energy Island Programme have been set up to bring high skilled jobs to the area through major energy investments. They will help to establish the island as a world-renowned centre of excellence in low carbon energy generation.”

Summary

For property investors, Anglesey has an obvious appeal. It is producing rates of capital growth that are surpassing almost all other parts of Britain. Putting aside the short-term impacts of the pandemic, yields are generally very good, rental demand is exceptionally strong and most commentators expect properties to gain significantly in value between now and the end of 2024.

In addition to all this, the island is also shaping up to become a UK centre of excellence in offshore renewable energy – a multi-billion-pound industry with the potential to generate thousands of new jobs. Already, the Isle of Anglesey stands as the local authority in North Wales that has witnessed the largest increase in employment - growing 11.6% since 2001 – so further growth will only add to upward price pressures and greater demand for good quality accommodation.

To find out more about property investment opportunities in Anglesey and North Wales, please call our advisory team on 01244 343 355.

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