​Spotlight on Sunderland Property Investment - Part Two

In the first part of this article, we focused on private sector investment in the city, which is happening on a colossal scale. Major employers such as Nissan and Rolls Royce are supporting extensive supply chains and sustaining thousands of jobs, but still more are expected as a result of growth in key industries such as advanced manufacturing.

Investors with property in Sunderland can therefore look forward to an extended period of economic growth and rising demand for rentals. And importantly, much of this demand will stem from those with higher skills and incomes, so landlords with higher quality properties to let are set to benefit the most.

Private sector investment continues to energise the economy and it seems inevitable that it will do good things for the property market too. However, it is not all about business and industry; there are other important factors that make Sunderland an exciting investment destination, and it's these that we'll consider in this post.

Rising Employment in Sunderland

In July last year, the Leader of Sunderland City Council, Cllr Paul Watson said "Sunderland is undergoing huge change, building on our great history of enterprise and endeavour to become a modern and prosperous 21st century city." This is certainly true, and with such a lot happening, it's no surprise that employment is rising steadily. In fact, such is the rate of job growth that the Council is actively concerned that demand for jobs may actually outstrip the city's ability to supply workers. The result is that Sunderland is becoming a 'net importer of labour.'

The council’s Employment Land Review (2016) indicates that between 1997 and 2015, the total number of jobs in the city increased by 9,630 - a growth rate of 8.0%. Increasing numbers of workers are therefore commuting to the city, but many are finding it difficult to settle due to a scarcity of good quality 'starter size' accommodation. The bulk of local housing stock is relatively old, of questionable quality and bunched within the '2 to 3 bedrooms' bracket. The scale of unsatisfied demand for good, one-bedroom units could afford an important opportunity for investors.

Rising Population:

In our first post, we pointed out that Sunderland boasts a very large university student body. This, combined with an influx of new workers and natural growth in the city's own population, is all adding to pressure on the housing market. 

The city's population has been rising since 2009 and is forecast to grow by over 8,000 between now and 2033. Projections published by the Office for National Statistics suggest that the number of over 65s will also add to demand for housing, rising by around 22,000 by 2039. Housing supply is unlikely to be able to keep pace, so rental demand should stay extremely strong for the foreseeable future, and the imbalance between supply and demand could begin to drive further capital appreciation.

Public Investment

Despite concerns that "forecast population growth would not be sufficient to support the anticipated level of jobs growth within the city," Sunderland City Council and its partners are certainly not taking that as any excuse to slow the pace of economic development. On the contrary, their efforts are intensifying - and to evident effect.

Major projects include the three-phase Sunderland Strategic Transport Corridor, which aims to connect the major centres of new development and employment. It will ensure fast connections between the city centre, the International Advanced Manufacturing Park and the Port of Sunderland, both of which were recently designated Enterprise Zones. The second phase - a £118 million road bridge across the River Wear - is approaching completion and a third phase, valued at £57 million, will begin in 2019.

Transport is a priority for redevelopment. The city's Metro system, for example, is undergoing a £337 million upgrade, the city's central railway station is scheduled for an important facelift and various development locations will be opened up by the continuing programme of road improvements. 

The list goes on, but what is clear is that when it comes to promoting economic growth, the public sector is pulling out all the stops. Collectively, the combined transport and infrastructure improvements are expected to create at least 10,337 new jobs.

The Sunderland Property Investment Market

All the ingredients are in place for an outstanding property investment destination. The population is growing, the economy is thriving, and there's an impressive pipeline of inward investment that will continue well into the next decade. Employment growth is essentially certain and this will add to already buoyant demand for rental property.

Currently, that demand is not being met. Supply is based largely on outdated housing stock that often fails to meet the needs of newly arriving workers. As the inward migration of professionals and key workers continues, the market will almost certainly witness growing interest in newer properties that offer better facilities and higher standards of living. There are plans for new house-building projects, but numbers will be relatively limited and construction will mainly be taking place in outlying districts rather than close to the centre, where many employees would ideally wish to be.

Presently, there are few good properties available to let, particularly in the city centre, which is best placed to benefit from the improvements now taking place. Those units that come to the market are likely to be bought up very quickly.

Fortunately for investors, average prices in Sunderland are still well below national norms, so initial investment costs will typically be low. Given the high rental demand in Sunderland, yields will also tend to be excellent. According to Totally Money's "Top 25 Buy-to-Let Property Hotspots" for 2017/18, Sunderland sits comfortably at position number 20 in the UK rankings, promising average yields of 7.87%.

The North East is not notable for rapid capital appreciation but in the present climate, most serious property investors will be looking primarily for yield. Nevertheless, when it comes to price growth, Sunderland properties have been performing surprisingly well. In February 2018, BDaily news published figures from local sales and lettings agents that showed year on year gains of 6.4%.

Steady capital appreciation, easy affordability , rising demand and truly excellent yields; these are all good reasons why Sunderland is looking increasingly appealing to investors.

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To find out more about investment opportunities in Sunderland, please call our advisory team on 01244 343 355 option 4 or email sales@residential-estates.co.uk

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