Investing in buy-to-let properties has long been a popular avenue for generating passive income and building wealth, especially in cities with high demand and consistent property price growth. Cambridge, with its rich history, academic prestige, and thriving economy, has long been an attractive location for property investors. However, as the city continues to grow, it’s essential to understand whether Cambridge remains a sound investment for buy-to-let landlords and how it can affect the rental value of your home. In this blog, we will delve into the key statistics surrounding Cambridge’s property market, rental trends, and the potential returns for buy-to-let investors.
Cambridge Property Prices: A Growing Market
When it comes to property prices, Cambridge is undoubtedly one of the most expensive cities in the UK. According to Numbeo, it is ranked as the second most expensive city in the country, with housing prices far above the UK national average. As of October 2023, the average property price in Cambridge, as reported by the HM Land Registry UK House Price Index, stood at £542,142. This reflects a 2.62% growth compared to the previous year, highlighting Cambridge’s continued appeal to buyers despite its higher-than-average prices.
In comparison, the national average house price in the UK is £287,782, significantly lower than Cambridge’s property prices. This indicates a premium market, which may be appealing to investors looking for long-term capital appreciation. While the higher prices might seem intimidating, they also suggest a market with solid demand, particularly from professionals, academics, and international buyers.
Among the property types in Cambridge, terraced houses have been the most popular over the past 12 months, with an average price of £587,334, according to Rightmove. This suggests a steady demand for properties that offer good value for money and easy access to the city centre. Given Cambridge’s global reputation as a centre of education and research, it’s likely that the demand for terraced properties will remain high, particularly for rental properties.
Cambridge’s Buy-to-Let Rental Market
When considering buy-to-let investments, rental yields are a crucial factor. Cambridge’s rental market is one of the most expensive in the UK, with average rents significantly higher than the national average. According to Home’s Cambridge Market Rent Summary, the average monthly rent for a property in Cambridge is £2,594. This is above the average rent across the UK (excluding London), highlighting the strong rental demand in the city.
The potential for income generation is clear, but what does this mean in terms of rental yields for buy-to-let investors? The average rental yield in Cambridge is currently 5.74%, which is higher than the national average of 5.33%. While this yield might appear modest compared to other regions, the higher property prices in Cambridge are a factor to consider. Higher property values naturally mean higher rents, and this contributes to the appealing yields for investors who want to capitalise on rental income.
However, rental yield isn’t the only factor to consider when investing in buy-to-let properties. It’s essential to examine the types of properties that attract renters and the demographics of those renters.
Rental Property Types and Their Demand
While Cambridge’s rental market is characterised by high rents across the board, different types of properties appeal to different renters. For example, single rooms in shared accommodation typically rent for £808 per month, providing a steady income stream for investors with smaller properties. On the other hand, flat rentals in Cambridge can command much higher prices, with the average rent for a flat at £3,147 per month. Flats are particularly in demand among young professionals, university students, and international tenants who seek proximity to Cambridge’s bustling city centre.
Interestingly, houses in Cambridge have a lower average rent at £2,213 per month. This suggests that family-sized properties or larger homes may offer a more affordable option for long-term tenants compared to flats or smaller units, though they may be less common in the central city areas. Investors looking for properties with stable long-term tenants might want to consider investing in family homes or terraced houses, which typically offer a solid yield with fewer turnover rates.
Rental Growth in Cambridge
Understanding the broader rental growth trends in Cambridge is also critical for buy-to-let investors. According to the 2023 Homelet Rental Index, the East of England, which includes Cambridge, saw annual rental growth of 8.10%. While this growth rate is solid, it falls short of the national rental growth rate of 10.30%, suggesting that while Cambridge is still experiencing healthy rental growth, it may not be growing as rapidly as other UK regions.
Despite this, Cambridge’s established reputation as a global education hub and its thriving job market, particularly in the tech, research, and healthcare sectors, continue to support the demand for rental properties. For investors, this suggests a stable and predictable rental market, albeit with slightly slower growth compared to other fast-developing areas.
The Advantages of Investing in Cambridge’s Buy-to-Let Market
Despite the relatively high initial costs, Cambridge offers several advantages to buy-to-let investors:
- Strong Demand from Students and Professionals: With the University of Cambridge attracting students and academics from all over the world, there is a steady demand for rental properties. Investors can expect a high occupancy rate in rental properties located close to the university.
- Long-Term Capital Growth: Cambridge’s property prices have shown consistent growth over the past few years, suggesting that property values will continue to appreciate in the long term. This makes Cambridge an appealing option for investors looking for capital gains.
- Stable Rental Market: With high rental yields and steady demand, Cambridge offers a stable rental market for investors, providing a reliable source of income. The demand for rental properties from students, professionals, and families ensures minimal vacancies and long-term tenancies.
- Government Investment: Ongoing infrastructure developments and government investment in Cambridge’s transportation and housing sectors are expected to further boost the city’s appeal to both residents and investors. These investments can lead to increased property values and rental demand in the future.
Conclusion: Is Cambridge Right for Buy-to-Let Investments?
Cambridge offers strong potential for buy-to-let investors, particularly for those looking to capitalise on stable rental yields and long-term capital growth. Despite high property prices, the city’s constant demand for rental properties from students, professionals, and families ensures a steady market for landlords. Additionally, the city’s reputation as a global academic and research hub continues to drive interest from both domestic and international tenants.
For investors willing to navigate the higher property prices and slower rental growth, Cambridge remains an attractive option for buy-to-let investments. By carefully selecting the right property type and location, investors can tap into Cambridge’s thriving rental market and secure a profitable investment.
