Property Investment in Derby

If you’re a regular visitor to the Residential Estates website, you’ll know that we’ve previously published a property investment guide to Derby’s nearest neighbour, Nottingham. Many of the regional strengths that make Nottingham a stand-out destination for investors apply equally to Derby, but this up-and-coming Derbyshire city has much to offer besides. Continuing economic growth, a multibillion-pound inward investment programme, and a history of strong rental demand are all helping to create an exceptionally attractive buy-to-let market.

In our downloadable guide, we explore some of the reasons for this, including:

  • Derby’s economy
  • Inward investment in Derby
  • Major developments in Derby
  • Derby’s principal growth sectors
  • Derby’s housing market
  • Buy-to-let investment in Derby
  • The student property market 
  • Predictions for the buy-to-let market in Derby

Why Invest in Derby? 

In recent years, Derby has established itself as a highly rewarding property investment destination whose appeal only gets stronger as time goes on. It has strengths in advanced manufacturing and numerous other high-value sectors that are helping to support one of the highest rates of average earnings in Britain.

Importantly, Derby is also is part of a region that has wide-ranging plans for employment growth and urban regeneration – forces that will inevitably boost local rental demand.

In short, a range of key indicators suggests that Derby will remain one of the country’s best buy-to-let destinations, and not just for the short term but for decades to come. Some of those indicators include:

  • Part of the East Midlands, one of the UK’s fastest-growing regional economies
  • Continuing population growth
  • £billions worth of inward investment secured in the last ten years
  • Major regeneration projects currently in the pipeline
  • A multimillion-pound beneficiary of the Transforming Cities Fund
  • 4,500 jobs created over the last three years
  • Thousands of new jobs forecast over the next decade
  • A high concentration of high-value industries
  • The second-highest average earnings in Britain
  • Massive rental demand
  • Affordable property prices
  • Strong rental yields
  • A university student population of circa 34,000
  • Set to benefit from HS2 rail links


Inward Investment in Derby

According to Marketing Derby, the agency tasked with promoting the city to commercial investors, Derby has secured “£4 billion of investment in the last ten years, and £2.3bn of known projects (are currently) in the pipeline.” It also notes that “We have attracted £359 million of investment into Derby over the past three years… (and) attracted 4,500 new jobs.”

A recent report found that increasing numbers of employers have been seeking new property in the city. According to a review published by Innes England in February 2020, Derby saw £281 million of new commercial property transactions over the course of 2019.

These are important details for property investors because a buoyant economy generally helps to sustain rising standards of living, and these, in turn, typically translate into more money in the pockets of potential tenants and buyers. Over the long term, property values have generally mirrored average disposable incomes, so a strong economy bodes well in terms of both rental demand and longer-term capital appreciation.

Some of Derby’s most notable investment programmes include:

  • Derby Silk Mill
  • Derby Market Hall
  • Grade A offices, Bold Lane
  • Becketwell regeneration
  • The Nightingale Quater
  • Full-Fibre Connectivity 

Our Derby Investment Location Guide provides more information on these investment programmes but is clear that there are big plans to boost Derby's economy and investment opportunities in the near future. 

Business Growth in Derby

Advanced manufacturing is a key sector for Derby. Around 22,000 jobs are supported by the aerospace, automotive and railway engineering industries, but these are by no means the only high-value sectors in the city.

According to Derby City Council, other important sectors for GVA and employment include:

  • Creative and digital industries (12,500 jobs)
  • Quarrying (a £2 billion industry in the county)
  • Textiles (85,000 jobs and 2,300 businesses)
  • Tourism (worth £2.15 billion to the local economy; 28,000 jobs)

Other important sectors include hospitality and logistics.

The top 5 sectors in terms of business population include:

  • Professional, scientific and technical: 17.2% (1,225 enterprises)
  • Construction: 12.4% (905)
  • Retail: 8.4% (615)
  • Business administration: 7.6% (560)
  • IT and communications: 7.1% (515)

In essence, the local economy is built on higher skills and relatively ‘future-proof’ roles. This is a characteristic that should support robust demand for higher quality rental accommodation for many years to come.



HS2

In order to take advantage of the faster connection times promised by HS2, a new station is to be built at Toton, between Derby and Nottingham. According to HS2, the station will boast rapid connections to Derby, Nottingham, Leicester and East Midlands Airport. These connections will include new railway and tram lines, and a new link road to the M1 motorway. From here, it should be possible to reach either Derby or Nottingham in just 10 minutes.

Other journey times:

  • Birmingham Interchange: 17 minutes
  • Birmingham Curzon Street: 20 minutes
  • Leeds: 27 minutes
  • York: 35 minutes
  • London: 52 minutes

The East Midlands HS2 Growth Strategy predicts that, regionally, HS2 could help to create 74,000 new jobs and add £4 billion per annum by 2043.

Derby: An Overview

Located in Derbyshire in the East Midlands, Derby is part of a region that regularly appears in the top UK rankings for buy-to-let investment. Its central location has helped to make it popular amongst larger employers; particularly manufacturers and logistics companies that can make use of convenient transport links. Derby now hosts such global names as Rolls Royce, Toyota and the train manufacturer Bombardier. In all, around 22,000 people work in advanced manufacturing across Derbyshire.

According to ONS (2019 data), the Derby local authority area has a population of 257,302, but that’s expected to grow to 281,800 by 2041.

  • Population: 257,302
  • Business population: 8,350
  • Manufacturing accounts for the largest percentage of local employment
  • Annual exports: circa £6.1bn (of which 90% manufactured goods)
  • Around 43,000 engineers live in Derby and the surrounding area
  • The average weekly wage is £619, which compares to a national mean of £497
  • Derby has a strong R&D sector; in the UK top 4 for patent applications
  • Derby City Council has a City Centre Masterplan that seeks to leverage £3.5 billion in new investment and create 4,000 new jobs by 2030
  • Part of the East Midlands; in February 2020, it topped the rankings in Ernst & Young’s Regional Economic Forecast, having grown at a faster rate than any other UK region.

Derby Housing Market

Derby’s high-value industries, impressive rates of pay and continuing economic growth are helping to attract rising numbers of workers to the city. Rental demand is already high, but a continuing influx of new residents would put even more pressure on the sector.

Covid-19 and the threat of a no-deal Brexit have created two, ‘once in a generation’ challenges for the local economy. It is important not to read too much into market data that has arisen during such a turbulent period, but even in the midst of all the upheaval, Derby has performed well.

 According to Zoopla, average values in Derby rose by 3.68% between June and August 2020, which equates to an upturn of £7,333 in absolute cash terms. According to Rightmove, annual price growth was more modest but values in 2020 were still “8% up on the 2017 peak of £179,285.”

Buy-to-Let Investment in Derby

The average values quoted by Rightmove and Zoopla (£193,915 and £206,633 respectively) are well below the UK mean. For comparison, Rightmove’s August 2020 House Price Index puts the national average at £319,497.

In other words, despite all the economic activity now taking place, average prices are still very affordable. This is most likely because many of the most important social and economic impacts have yet to be felt. Investment projects are generating new jobs, certainly, and putting more money into local supply chains, but their longer-term effects will be much more pronounced. Jobs and rental demand should grow steadily and continuously over the next 20 years, creating ideal conditions for buy-to-let investors.

In other words, Derby is an excellent market for longer-term investments; the sort of destination that should deliver rewarding results, year after year. Job growth and a rising population should fuel dependable, steadily increasing rental demand, while rising disposable incomes should help to drive up average house prices.

More immediately, Derby should also deliver strong yields. Low prices and strong rental demand are always an attractive combination for investors, and as the economy gathers pace, gross returns should only improve.

According to the online lettings platform Howsy, Derby has seen rental yields improve quickly in recent months, pushing the city into the UK top 10 for growth. LiveYield.co.uk has reported that average gross returns have varied between 3.7% and 4.8% by postcode. (These averages relate to all property types, of course, and a carefully selected property could deliver substantially more.)

Derby Property Market Predictions for 2020

In June, Savills suggested that all regions would see a sharp drop in values over the course of 2020, but that most would then make a swift recovery. The company expects the East Midlands to sit comfortably in the top 5 fastest-recovering regions, with properties gaining an average of 7% during the course of 2021, and a total of 18.4% by 2024.

Market predictions are difficult at the best of times and, faced with the uncertainties brought about by the pandemic, the task is especially difficult. But the dust will settle eventually and, in the meantime, Derby will continue to show all the characteristics of an outstanding investment destination. Demand for rental accommodation greatly exceeds supply, average prices remain affordable, and a wealth of important urban regeneration projects are sure to invigorate the local economy for many years to come.

For more information, please download our guide: Property Investment in Derby– A Guide.

Additional Reading:

For more information, please download our guide to Property Investments in Derby: 

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