Since the downturn in the financial markets there has been a shift in newbuild property purchaser, partly due to changes in recent delivery. During the boom, high loan-to-value mortgage years prior to 2008, buy-to-let investment purchasers were dominant across Swansea and Cardiff, as flatted developments were increasing in number and investors purchased as a result of high demand within the private rented sector.
Demand for private rented property was partly influenced by increasing levels of students within University towns along the M4 corridor. Rising student levels to 73,000, equivalent to 45% growth over the past 15 years and 35% over the past decade, allowed investors to purchase at yields around 5% to 6%. Growth has been facilitated by an increasing number of international students, which now constitute around 25% of all students in Cardiff, 13% in Swansea and 11% in Newport, according to latest 2010/11 HESA data.
Strong demand for rental
Accommodation from international students, as the supply of purpose built student stock lags behind demand, and increasing numbers of first time buyers unable to raise funds for deposits, consequently locked out of the sales market, has kept rental yields strong even during a period of house price devaluation.
This is providing a boost to the rental sector; according to the LSL buy-to-let index, rental values across Wales increased by 4.2%
during 2011, outperforming most regions of the UK, with growth strongest in Cardiff.
Employment levels across South Wales have not eased the housing market, as Cardiff, Swansea, Newport and Bridgend have all suffered at least two years of continuous negative employment growth since 2007. This trend will soon reverse, with Oxford Economics forecasting growth in all four areas from 2013/14 onwards, which is reflected in population growth projections.
Signs of the employment market returning have been boosted by companies such as Admiral, and other large-scale employers, announcing expansion plans. Future employment growth will sequentially have a positive impact on the housing market, which links to the recovery trend in our five-year house price forecast.
