Often, it’s the UK’s biggest cities that attract the most interest from property investors. However, with its thriving economy, big development plans and exceptionally strong demand for rented property, the city of York is also deserving of serious attention. In our downloadable guide, we examine some of the reasons for this, including:
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York is certainly a well-known city – a tourist hotspot that draws upon centuries of history – but in recent years, it has also established itself as a high-performing property investment destination. On key measures such as capital growth, gross yield and rental income, the city has consistently outperformed UK-wide averages, and rental demand here is amongst the strongest in the country.
It’s also market that’s poised to see a further improvement in performance, thanks to a range of large investment projects and developments close to the city centre. These include York Central, one of York’s most ambitious urban regeneration programmes. It’s a mixed-use development that could swell the city coffers by over £1 billion.
Importantly, York benefits from the support not just of its own local authority, but also an inward investment agency, two local economic partnerships, and the West Yorkshire Combined Authority – all of which are setting ambitious targets for job creation and economic growth.
Key points to consider:
York is located in an area supported by the York and North Yorkshire Local Enterprise Partnership, which is developing proposals for a devolution deal. This could potentially secure up to £2.4 billion of sub-regional investment over the next 30 years.
Equally importantly, York is supported by West Yorkshire Combined Authority and Leeds City Region Enterprise Partnership. The two agencies have been working together to develop a far-reaching Strategic Economic Plan, which aims “to deliver an extra 36,000 jobs and £3.7 billion of economic output by 2036.”
York is benefiting from inward investment and infrastructure development at both the local and regional levels. West Yorkshire Combined Authority notes that it is investing around £2 billion in transport, housing, and urban regeneration. It also notes that a successful devolution deal could deliver:
£38 million for 30 years via the West Yorkshire Investment Fund
Access to a new five-year integrated transport settlement
£317 million to improve public and sustainable transport
Control of the £63 million annual Adult Education Budget
Connectivity is an important local priority; York and North Yorkshire has invested more than £70 million in road improvements that will open up new areas for development. It has also spent nearly £50 million on skills and training since 2014, and the two universities are now funding local projects worth nearly £150 million.
York could also benefit from a share of a £179 million fund designed to promote research into science and technology. The city will host one of four pilots under the Doctoral Training Partnerships scheme, under which the University of York will focus on developing processes for more sustainable and efficient chemical manufacturing.
York Central is a major mixed-use development on one of the largest brownfield sites in the UK. Planning consent was granted in March 2019. Situated beside York Railway Station, it will have its own designated enterprise zone and it is expected to grow the economy by 20%. This equates to over £1.1 billion GVA. The implications for local supply chain businesses and job creation are immense.
Size: 45 Ha
Office & leisure space: 112,000m2
Completion: March 2030
Job creation target: 6,500
Funding: £77 million secured to date
The scheme will support the £50 million plan to expand the National Railway Museum. Works will include a new western entrance to the station; a new park and square; educational facilities; and a western access road, supported by a series of improved pedestrian and cycle connections. The works will boost the city’s tourism offer and should consolidate York’s position as a UK centre of excellence in railway engineering.
Despite its history, York has established itself as a centre for several high-value, high-growth industries. These include:
Financial and professional services
Growth is underpinned by a well-qualified populace. The City Council notes that “just under half of York’s residents are qualified to degree level our higher, meaning that the city has the highest skills levels of any city in the north of England.”
As more workers take up more professional, higher-paid jobs, so average disposable incomes will tend to improve. This generally correlates with higher demand for quality rental accommodation, and upward movement in average house prices.
West Yorkshire Combined Authority has suggested that adopting a circular, ‘green economy’ could help to create 100,000 jobs in West Yorkshire by 2030, and create £11 billion in GVA. It predicts that the low carbon economy could grow 11% per annum to 2030, “four times faster than the projected growth of the economy as a whole.”
The LEP agrees. It sees its “natural capital economy” as a major driver of growth. It estimates its value at £20 billion, and seeks grow the sector by 31% by 2050. That would equate to an extra £946 million per annum.
Planners have seen real potential in York Central as a springboard for further growth. They note: “York Central can be the new physical home for the city’s rail engineering sector. York is a key hub for the UK’s rail industry. York Central can provide a physical hub for the industry to cluster itself around.”
Moreover, the city’s leading research in computer science is helping to make it a logical base for technology businesses. The council observes that “a strong synergy currently exists between rail engineering and the digital tech sector, with growing expertise around signalling innovation.”
York’s tourism sector has been badly affected by the Covid-19 pandemic, as it has in most other popular tourist cities, but the underlying trend has been one of steady growth.
In 2015, VisitYork.org reported that the city had welcomed 6.9 million visitors that year, attracting £564 million of expenditure and supporting 19,000 jobs. Four years later – in 2019 – it reported a pronounced improvement:
Visitors: 8.4 million (+1.5 million)
Expenditure: £765 million (+ £210 million)
Jobs: 24,400 (+5,400)
Like employment and population growth, the expansion of the city’s tourism sector is good news for property investors. It helps to drive up demand for rental accommodation, particularly in the potentially lucrative short-stay sector. Moreover, as a ‘city break’ destination, York sees steadier year-round tourism than many coastal towns and properties in national parks, so it tends to deliver higher rates of occupancy. In 2019, occupancy rates in York reached an all-time high of 80.3% across the whole year.
York will be one of the British cities directly benefiting from HS2. High speed trains will serve York station, making the city more readily accessible to tourists and business visitors. HS2 gives some examples of how the new line will speed connections.
East Midlands Hub, HS2 time 35 minutes
Birmingham, HS2 time 57 minutes / current time 112 minutes
London, HS2 time 84 minutes / current time 111 minutes
In May 2020, the City of York Council devised a Covid recovery plan and formed 12 recovery group panels, comprising representatives of key industry sectors. Council leader Councillor Keith Aspden noted that the council had provided over £100 million in support and developed its own £1 million grant scheme to help those falling through the gaps.”
Then, in September 2020, York and North Yorkshire Local Enterprise Partnership put together a funding application to central government, seeking a share of its £900 million Getting Building Fund. The pot could be worth up to £15.4 million, spread across 10 regional projects, and should help to safeguard businesses and workers against the worst of the winter pandemic.
In September 2020, figures published by Zoopla found that demand for accommodation in York had risen by a massive 28% over the previous 12 months. Findings from the same report included:
Average house price (York): £250,000
Average capital gain (York): 3% year-on-year
Average gain (UK): 2.5%
Average 5-year gains (York): 19.4%
Average 5-year gains (UK): 18%
Change in tenant demand (York): 12% year-on year
Average rent (York): £830 pcm
Average annual rent rise (York): 4.5% (year-on year to July 2020)
Average yields (York): 4.3% to 5.5% by postcode
Data from Home.co.uk found that median asking prices had risen around 2%, but asking prices for smaller units had gained more: 3% for 1-bedroom properties, and 6% for those with 2 bedrooms.
York has two universities: the University of York and York St John University. Collectively, they sustain a community of around 40,000 undergraduates, post-grads and researchers. They are also important employers and investors in the city. Currently, the University of York is developing a new £130 million campus.
Student rental demand is robust, predictable and rising, year-on-year. Between 2016 and 2020, the student roll at the University of York increased by 2,540. There is a healthy student rental market within the city, though yields vary considerably by location and property type.
Given the present uncertainties surrounding Covid-19 and the consequences of Brexit, many commentators are understandably reluctant to offer any predictions for 2021 and beyond.
There are few, if any, credible predictions for York itself, but Savills expects to see prices in Yorkshire and Humber rise by 24.1% by the end of 2024. That compares to a UK average of 20.4% over the same 5-year period. Hamptons International’s 4-year forecast expects Yorkshire and Humber to see gains of 10.5% by the final quarter of 2023.
In the absence of more specific predictions, investors can only focus on the fundamental economic forces governing the property market. Fortunately, in all the respects that matter, York is faring very well.
The city is already witnessing exceptionally strong rental demand, and this should only strengthen as employment numbers and the local population grow. Similarly, York’s resilient economy, coupled with large new investments and a growing emphasis on higher skills, should all help to underpin rising living standards and average disposable incomes. In turn, these factors should help to support rising rental values and sustained capital growth for many years to come.
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