Spotlight on Padstow, Cornwall

It hasn’t been long since we published our regional investment guide for Cornwall so you might be wondering why we’re producing this additional article, which focuses on the port town of Padstow – one of the county’s best known tourist spots.

Partly, it’s because Padstow, being relatively small and tucked away on Cornwall’s northern coast, is a rather different proposition to large resort towns like Newquay and to various south-coast destinations such as Penzance and St Austell. Partly, too, it’s because the UK economy has seen big shifts even in the short time since we published our Cornish guide. So returning to the area affords a useful opportunity to consider how local prospects have changed for investors.

For an investment guide featuring a large city like Liverpool or Birmingham, we’d typically review a whole host of factors: inward investment, economic growth, demographic trends and the like. In the case of Padstow however, and in the cases of many similar small Cornish resorts, the situation is much simpler. Here, by far the largest force shaping the property investment market is tourism. And in 2021, the market is continuing to move in a very favourable direction.

Padstow & Tourism

Padstow Town Council writes that “the population of the parish is approximately 2,500, (but) in the summer months this figure rises to around 5,500 and day visitors are in the region of 500,000 a year.”

Padstow is clearly a significant element of Cornwall’s thriving tourist industry and, as such, its changing fortunes reflect those of the wider county. In 2019, before the Covid-19 pandemic took hold, Malcolm Bell, chief executive of Visit Cornwall appeared in an article in Cornwall Live. In it, he noted that the county typically received around 4.5 million visitors every year and that the industry was worth £1.5 billion. At around the same time, the FT quoted a larger figure, reporting that “tourism accounts for around £2bn of the economy and a third of private-sector jobs.”

Whichever figure is more accurate, tourism revenues took a sharp hit in 2020 due to the coronavirus lockdown and associated travel restrictions. By some estimates, the local visitor economy shrank by almost 45%.

However, as international travel restrictions forced British holidaymakers to stay within the UK, so Cornwall proved itself to be a resilient tourist market. In its Tourism Recovery Plan (June 2021) the government’s Department for Digital, Culture, Media & Sport wrote that while many UK regions suffered during lockdown, “a minority of coastal and rural areas – such as Cumbria and Cornwall – were able to hit 100% occupancy in the summer months of 2020, albeit at reduced capacity due to social distancing.”

A June 2021 report by the Economics Observatory suggests that this resilience is well entrenched and could serve Cornwall very well in the coming years. It writes that the county’s “heavy reliance on hospitality services could end up aiding Cornwall’s post-Covid-19 recovery. With international travel restrictions continuing to hamper UK tourists’ ability to travel overseas, domestic holiday destinations like Cornwall are already experiencing surging demand. By April (2021), there were already reports that 98% of holiday accommodation in the county was fully booked for the season. This has enabled owners and businesses to charge higher prices too. The boost may last for many seasons to come.”

Against this background, predictions made in 2019 by Visit Cornwall might yet materialise. Its chief executive, Malcolm Bell suggested that within ten years’ time, the tourist economy could grow by £521 million and create an additional 8,000 jobs.

Tourism & Demand for Property

In many Cornish resorts, the annual inward migration of tourists provides a welcome and necessary injection of cash and vitality into the local economy. This is largely true of smaller resorts too, but it is also the source of some considerable head-scratching on the part of local planners.

On the one hand, tourism is an invaluable lifeline that supports roughly 30% of all jobs in the county. On the other, demand for holiday properties and second homes has pushed prices up tremendously, to the extent that many locals feel that they are being priced out of the market.

Last year, Cornwall Live wrote: “Demand for holiday homes (or second homes) is substantial. According to one study, with 18,621 empty residences, Cornwall has the highest number of vacant houses of any local authority area in England. It is estimated that 13,642 of these buildings are second homes, mostly used as holiday lets.”

It’s a familiar dilemma for local authorities and for residents in popular tourist locations, but one fact is inescapable: demand for property in attractive coastal resorts is sky-high and, since the advent of Covid-19, that demand has only intensified. That, in turn, has driven strong capital appreciation, and with holiday let landlords able to command substantial rental incomes, it’s small wonder that Cornish towns and villages are attracting such attention.

“The Race for Space”

Padstow, like numerous neighbouring towns and villages has long been a hotspot for British tourists. It boasts scenic countryside and open beaches, and just across the river lies the resort village of Rock, a popular destination for royals, millionaires and curious day-trippers. That has made Padstow an obvious and rewarding target for investors. However, in recent months, demand for property has arisen from a new source: people wishing to move out from London and the South East.

“The race for space” describes a pronounced upturn in people seeking to leave big cities in favour of more rural locations with better access to parks, countryside and coastline. Cornwall has been the subject of particularly close attention, as the Economics Observatory recently reported. It writes that “as more workers consider continuing with remote working after the pandemic, regions like Cornwall appear to be popular destinations for those leaving cities. According to housing website Rightmove, Cornwall has overtaken London as the most searched-for location by potential buyers. In the past year, six of the ten most popular locations for property buyers were in Devon or Cornwall.”

Property Prices

So what have these combined factors meant for average values in Padstow? In short, prices have rocketed, both in 2020 and in 2021.

According to PlumPlot, between May 2020 and April 2021, average values in Cornwall as a whole rose by +14% year-on-year, which was equivalent to over £37,000. By contrast, average values in England and Wales rose by a rather more modest +9%, equivalent to a gain of just over £27,000. The agency doesn’t give precise figures for Padstow, but others do.

Zoopla, for example, finds that as of June 2021, local house prices have risen by 13.7% year-on-year, adding £66,745 to the price of a typical property in the town. This is more than twice the UK median salary of £31,461, as estimated by Statista. Zoopla estimates that the average value is now £554,034 – well above the UK-wide norm. Moreover, as demand has increased, many buyers have paid more than the original asking prices, pushing the average “price paid” to £569,794.

Rightmove’s figures suggest a very similar long-term pattern. The company notes that “overall, sold prices in Padstow over the last year were 20% up on the previous year and 29% up on the 2018 peak of £439,283.”

Rental Yields

Given those high property values, its perhaps unsurprising that average yields are relatively modest. When average values exceed half a million pounds, generating big and immediate yields is a challenge. LiveYield, for example, estimates the average yield in the PL28 outcode at around 2.3%, but returns rise to 3.6% in neighbouring PL27.

Those are still returns that would keep investors comfortably insulated against inflation. However, the real attraction of property investment in Padstow isn’t fundamentally about gross yields. It’s about securing a fast-appreciating, high value asset in a market that’s being buoyed up by powerful and well-established forces. Those include a robust tourist industry and rising demand on the part of those many thousands now making an exodus from London.

Padstow: Key Tourist Attractions

Given its impressive record of capital gains and strong demand for profitable, short-stay rentals, it’s perhaps worth looking in more detail at some of Padstow’s most notable features.

Its tourism appeal is predicated on a picturesque rural location. With open green space on three sides and the sea to its west, the town is ideally located for holidaymakers.

There are great beaches within easy striking distance. Cornwall’s Top 10 writes that “Less than 10 minutes’ walk along the coast path from the harbour is a huge expanse of golden sand. St George's Cove, Tregirls and Hawker's Cove are fantastic family beaches and, if that's not enough, then there are the beaches of Rock, just a 5-minute ferry ride across the river.” There’s also a great choice of aquatic pursuits on offer, including boat rides, a surf school and wildlife-spotting trips, where passengers can expect to see seals, puffins, dolphins and even basking sharks.

Inland, activity options include miles of beautiful walking country, plus the Camel Trail, a 17-mile ‘car-free’ cycle track that crosses the peninsula all the way to Bodmin. Built on a former railway line, it’s reportedly enjoyed by around 300,000 cyclists every year. Other attractions include golf, a skate park and organised activities such as wine tours, spa retreats and visits to Padstow Museum.

However, people naturally gravitate to the harbour itself, to enjoy award-winning food, as well as a fantastic array of shop, bars and cafes. Padstow Live writes that “at the centre of all activity is the harbour. Brass band concerts are held regularly, visiting entertainers often perform on the quayside, fishing and pleasure trips depart from there, and much social activity is conducted from the harbourside cafes, restaurants and pubs.”

Noteworthy eateries include the Rick Stein Seafood Bar, and several businesses owned by Paul Ainsworth, the Michelin-starred chef.

Access

Most visitors to Padstow tend to drive. It’s served by the A389, and located approximately 7.5km (4.6 miles) northwest of the A39, which follows the coast northwards Barnstaple and beyond to Bridgwater and the M5.

However, the town can also be reached using public transport. Although the nearest railway station lies more than 20km to the southeast, at Bodmin Parkway, the station is an important stop for Go Cornwall Bus, which runs services to Padstow. The town is also served by the number 56 bus service from Newquay and it’s on the 11/11A route from Plymouth. Services run every hour on weekdays and Saturdays, with a reduced timetable on Sundays and Bank Holidays.

Finally, of course, as an ancient fishing town and one of the few safe harbours on this northern stretch of the Cornish coast, Padstow is also accessible by sea. It’s a popular stop for day-cruise visitors and hired pleasure craft as well as more experienced sailors.

The Wider Context for Investors

Padstow is an example of some of the many Cornish resorts that have caught investors’ attention in recent years, and particularly since the advent of the Covid-19 pandemic. The rise of the British ‘staycation’ has given a huge boost to local markets, and investors are now enjoying unprecedented demand, an extended summer season and the ability to command higher prices.

Importantly, this isn’t likely to be a short-lived phenomenon that only persists for as long as Covid-19 remains a high-profile threat. Cornwall, Devon and other popular tourist haunts enjoy high levels of repeat businesses from visitors who tend to develop long-standing family traditions. Once holidaymakers find a resort that they particularly like, they will very often return there year after year. Consequently, those that had already made Cornwall a firm favourite before 2020 will probably continue to do so, but in 2020 and 2021, many first-time visitors may also have become converts. As a result, towns like Padstow can very likely look forward to higher levels of demand in successive years, regardless of the global pandemic and its impact on international travel.

Statistics published in the Cornwall Visitor Survey 2018/19 lend weight to this argument – that Cornish destinations enjoy especially high levels of visitor loyalty and repeat business.

  • 88% of respondents to the Cornwall Visitor Survey had visited Cornwall before
  • 68% of visitors lived outside the South West, and 8% were from overseas
  • 38% of all multi-day visitors stayed in self-catering accommodation
  • 26% used serviced accommodation
  • The average overall length of stay was 7.18 nights
  • Cornwall is consistently voted Best UK Holiday Destination

(These figures and other data can be found in our Cornwall regional investment guide.)

Back in February 2021, PropertyWire reported new findings from the chartered surveyors e.surv, which found that prices in the South West of England were rising faster than anywhere else in Britain – at an average rate (at the time) of 13.9%. Since then, other regions have been jostling for the top spot – most notably the North West. However, it’s clear that the combination of investor demand and a continuing ‘London exodus’ are maintaining Cornwall’s position as a leading contender.

In May 2021, Cornwall Live reported that “the average increase in the county (was) more than 50 per cent higher than the national upturn, and nearly five times that of parts of the UK.” That’s a county-wide figure, of course, but in some popular resorts, demand pressures will have been even higher. Another local newspaper report from May 2021 illustrates the point. It notes that a cottage in nearby St Isaac, less than 6 miles along the coast from Padstow, had sold within 5 minutes of going on sale.

The article quotes a local estate agent, who said ““Since May last year at the end of the first lockdown, there’s been an incredible demand for rental properties from both people living locally and nationally.”

Rightmove recently announced that it had seen a record number of searches for Cornish property – over 15 million since the start of the year, which marks an increase of +141%; the fastest rate of growth anywhere in Britain. Quoting Rightmove, Sky News stated that “rental enquiries more than doubled from 500,000 in Q1 2019 to 1.1 million in Q1 2021.”

Summary

An unusual range of factors have conspired to make Cornwall one of the most attractive property investment destinations in the country. Supply is severely constrained and demand could hardly be higher, so all indicators point to rewarding opportunities. That’s especially true of the holiday let market, in which average rental values have been soaring, but as more people look to move out of London and other big cities, it’s increasingly true of the residential market more generally.

Yields may be modest – a function of the high asking prices – but they are still currently outpacing inflation, and capital gains are of course exceptional. And looking ahead, agencies such as Savills expect this price growth to continue. In its  5-year mainstream residential forecast the company predicts that values will rise by over 18% across the South West by 2025, and at a more local level, they could rise faster still.

For more information about holiday let property investment in Cornwall, please contact one of our advisory team members on 01244 343355

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