Demand: Renting to Graduates, Where to Look and What to Expect
After we previously looked at young professionals, we thought we could move onto a new area of demand. Recent research by Savills has added some more insight we did not include in our previous article. While we previously talked about up and coming districts for us to keep an eye on, this new information shows us a broader look at the towns where demand is highest and what we can expect if we invest there. Having graduated earlier in the summer and spent some time enjoying the heat many graduates will now start looking for jobs and by extension looking for places to live as they transition into professional life. This is where we step in as they will need somewhere to rent before they are able to get onto the property ladder themselves. In Savills research they worked out where most of the jobs were being created and what these graduates will be paying in these areas. Below is the list:
The purpose of this data is to work out how affordable rents are in certain areas in comparison to the average wages in the same location. We would use this data as to get an estimate of our return on investment and cash flow. However, the missing piece of the puzzle for us to do this is the average house prices of these areas. This is all part of our ‘pick a pair exercise’ that helps us work out how viable a location is and is covered in our 3-day course. Viability is also very area dependent even down to the street within a town/ city as it is affected by things like proximity to the station. So, we can’t take this information as final especially the rent figures as these are also likely to fluctuate. Taking all that into account one piece of information that we all knew already but features in their list is that rents are much higher in London than other areas in the UK. This is relevant as in some areas this of London this will be 60% of their yearly pay compared to 30% average for the other areas. This may scare graduates away as the demand for work isn’t compatibly higher as we will look at now.
Some information that is particularly useful is the amount of businesses starting up to show how many jobs are being created. It acts as a great indicator of demand and is a vital part of our regular research. As we can see their list isn’t ranked in order for this data so it will have to be up to us to compare ‘business births’ as our ‘demand figure’. Unsurprisingly London has high job creation but not standout, there are plenty of other cities with very high number of businesses starting up. Manchester, Liverpool and Leeds are some of these standouts. This is not that surprising as many businesses are moving to these areas, especially in many growing sectors such as the IT industry. Again, Savills’ information is too simplistic for us as professionals. To get our concrete strategy we will have to work out which sectors are creating the most jobs and where in each town they are most concentrated in.
In summary there is work to be done but this list has some towns where we can start to look. For some suggestions of neighbourhoods within some of these towns to have a look at then I would suggest reading another one of our recent articles, ‘Popular Areas for Young Professionals’. If you want to learn more about getting started in property investing then come to one of our FREE Seminars.