The UK’s surprising new hotspot for property investors is Wales,
which is outperforming the rest of the country

As an architect of the Labour movement, Lloyd George would be spinning in his grave if he knew just how successful Wales has become in terms of a capitalist venture he doubtless would have despised – property investment. But the undeniable fact is that Wales has become the rather surprising jewel in the UK’s buy-to-let crown. The astute landlord who invested in buyto- let in Wales this time last year will have achieved almost twice the national average total return. The story is unlikely to stop there: trends in the local economy are positive, creating new jobs and causing an influx of workers into the area, fuelling tenant demand.

Furthermore, South Wales in particular is attracting the attention of global developers, including a Korean company which will be building a large scheme in Swansea where a £1 billion blueprint has been unveiled to transform the city centre and waterfront.

On top of that, Wales stands in second position in terms of total return, generating an average of 25.6%. This compares with an average of 12.9% for England and Wales as a whole. John Heron, managing director of Paragon, says: “Rents are rising strongly in Wales, but so are property values, although to a slightly lesser extent.

“On the back of that, investors have been enjoying steady rises in rental yields over the past few months, up from 6.3% to 7.1% in one quarter.

“With a positive economic backdrop underpinning growth in tenant demand, it is not surprising that Wales is the country’s top performer in terms of yield.”

Paul Rockett, managing director of Cardiff-based TBMC, a company which arranges mortgages for investors, agrees: “Wales is a particular hotspot. Following the successful redevelopment of Cardiff, from the Bay area outwards, we’re now seeing regeneration spread to other towns in South Wales, such as Swansea and Newport.

“Many international companies have moved into the Principality and this creates additional demand for homes, particularly for rented accommodation among younger workers who can’t or don’t want to buy for the time being, or foreign employees who may be here on a short-term contract.” In March, the average annual rent achieved by landlords in Wales was £11,251, up 32.7% on the figure in December (£8,480) on a typical property worth £158,239 – up 17.5% on December’s figure of £134,727.

An investor who bought a £133,297 property in March 2006 will have generated an average total return of 25.6% or £34,079 by March 2007. And prices have continued to rise since then.

The average price of £167,376 in March is now £168,279, according to Halifax. So, what might investors look for? In the Welsh capital, an extraordinary development is taking place on a ‘blue field’ site – in other words, land reclaimed from the sea, or more precisely, from part of Cardiff Bay.

Here, Bellway Wales are developing Prospect Place, the largest scheme currently under construction in Wales. It is attracting interest from investors both at home and abroad, as well as local first-time buyers, sports fans and downsizers.

Leisure

Close to the proposed £1.2 billion Cardiff International Sports Village, Prospect Place also has superb leisure facilities of its own, including an on-site health club featuring Wales’ first lap lane swimming pool, a stateof- the-art gymnasium, steam room, sauna and spa pool. The new Sports Village will have sports, leisure and entertainment, as well as waterfront housing, hotels, casinos and bars.

The magnificent Millennium Stadium is just ten minutes away, and several Welsh sports stars have already bought apartments at Prospect Place. The 14 blocks of studios and one and two-bedroom apartments which make up Prospect Place will be fully completed by 2010. There will be 931 apartments, ranging in size from one to three bedrooms.

Prices start from just £119,000 for a onebed apartment and two-beds are currently being released for £270,000.

Meanwhile, a Korean company, CoDA, is to build an £80 million scheme on a 2.7- acre site within the overall SA1 development scheme in Swansea. This is set to be the first Korean property investment of its kind in the UK and follows the South Korean Government’s easing of restrictions on its nationals buying foreign real estate. To date, however, South Korean real estate investors have concentrated largely on the US market, investing heavily in residential property.

CoDA is backed by a consortium of UK and Korean banks and investment funds to deliver Harbour Square as part of the £400 million Swansea Waterfront site. Harbour Square will consist of twin structures rising from four to nine storeys in height and comprising 406 apartments, including a percentage of affordable housing, car parking and seven retail units on the ground floor.

The scheme will be as green as they come and has been designed to reduce its environmental footprint. Underfloor heating will be installed in each flat and fed from a community heating system using biomass boilers fuelled by locally procured wood pellets which have a zero emission. A rainwater harvesting system will also be installed to reduce the consumption of mains water.

Just this scheme alone will create up to 400 jobs in Swansea during the three-year construction period.

Chief executive Hoshik Chi spent more than three weeks touring the UK looking at 25 potential sites before deciding on Swansea. “The fact that SA1 is being developed by the Welsh Assembly Government and that we will be engaging directly with the Assembly Government has created a huge amount of confidence amongst our investors and provided the assurance they needed,” says Chi. “

I was particularly impressed with the SA1 development and felt it offered by far the best potential, and our investors have also visited the site on a number of occasions. “

The market in Swansea is dynamic and buoyant and I have been most impressed by the city and the surrounding area.” Enterprise Minister Andrew Davies believes the Korean interest will help raise the profile of the city internationally: “The news that CoDA has singled out Swansea for this significant investment will, I am sure, act as a catalyst in attracting new interest in the city.”

Miles Thomas of estate agents Knight Frank, based in Cardiff, agrees. “

The continued demand for residential accommodation in Wales is the driver for increased investment at home and from abroad. Organisations similar to CoDA may now look to Wales’ strong property market as a route to invest,” says Thomas.