The number of sales of homes worth over £1million has more than tripled in Cambridge over the past five years as a result of increasing demand for property in the city. In the year to January 2015, the Land Registry recorded 66 sales over £1million compared with 21 sales at that level in 2009.

The market above £500,000 has also expanded. Over the same period transactions increased from 149 (36 new build) to 387 (140 new build). The prime market really gained momentum from 2011 to 2013, when the majority of this growth took place.

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^{Source: Savills Research, Land Registry                                                                                                               *11 months to Nov 14}

Location is key

The most expensive area to buy a property in Cambridge is the affluent neighbourhood of Newnham, which was last year’s runner-up in the Sunday Times 101 Best Places to Live in Britain. The average sale price across the ward in the year to January 2015 was just under £1m, reflecting the strong demand and scarcity of stock coming to the market. Only 34 transactions were recorded in the ward over the same period.

The location with the highest number of £1m+ transactions was the ward of Trumpington, recording 18 sales at that level in the year to January 2015, according to the Land Registry. Trumpington also saw the highest number of sales across all price bands, with 309 sales accounting for 19% of all transactions in Cambridge. This is largely due to the recent development centred on the ‘Southern Fringe’ as discussed on in our article, ‘Cambridge is Going For Growth’.

Increased investment

Growing interest from buy-to-let investors, who are buying across all price brackets has contributed strongly to price growth in Cambridge.

In the past few years, in particular, the proportion of investor buyers in the prime second hand markets has increased significantly.

Last year, nearly 30% of buyers were investors, compared to just 9.1% in 2012 according to Savills data. In the new build market, around 70% of buyers in prime areas were investors in 2014.

Investors are particularly attracted to Cambridge as there is a relatively mature private rented sector in comparison to the rest of the UK. According to the 2011 Census, 27.8% of households in Cambridge are in the private rented sector compared to 18.0% across England and Wales. The tenants include families, many students and a high proportion of those employed in the highest socio-economic groups.

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^{Source: 2011 Census}

Rental demand

Rents have risen by 52% over the five years to 2014 as a result of strong demand for rental homes against limited supply. At £987, the median monthly rent in Cambridge is higher than both the national and regional average (£738 and £746 respectively). The resulting gross yields for investors typically range from 4% to 6% depending on the type of property.

This rental growth is being driven by demand from both ends of the market. The prime rental market benefits from the strong employment market and the increasing number of international companies in the city. Savills figures show that in the prime markets, 71% of tenants renting are due to employment relocation and 45% of tenants are from overseas.

In the mainstream market, rental demand is being driven by would be first-time buyers who have been priced out of the market and/or are unable to access mortgages as a result of tighter lending criteria.

Looking forward

Average earnings in Cambridge are 17% higher than across the UK, and employment is forecast to grow strongly over the next few years. This indicates a strong and stable economically active tenant base that is likely to continue to attract investment from both the UK and abroad.