We have previously published spotlight articles on Nottingham and Leicester, and – more broadly - on the East Midlands as a whole. The region has long been an attractive market for property investors and the fact is borne out by a host of recent reports.

For example, the latest Rental Price Tracker from Rightmove notes that average rents have risen by +10.4% year-on-year in the East Midlands, and by +3.6% in just the last quarter. It also notes that gross yields are averaging around 6.4%. Moreover, ONS house price data published in October 2023, shows that while values have been falling in many parts of the UK, prices in the East Midlands have shown continuing growth, rising by +0.5% over the last 12 months.

There are many reasons why Nottingham, Leicester and certain other parts of the East Midlands are faring well in terms of economic growth and the property market, and we’ll examine some of those later in this article. However, there’s one notable market that we haven’t yet featured, and that’s Loughborough – a market town in Leicestershire that sits within a triangle bounded by Leicester, Nottingham and Birmingham. It’s one of the UK’s top markets for rental growth and, as we’ll see, it’s a market that’s well worth investigating.

Loughborough – An Overview

Loughborough is a town of modest size. The 2021 Census estimated that the population of the local urban area was around 109,100, but the town itself has considerably fewer residents. Nevertheless, it boasts many features that make it an excellent choice for property investors. In 2021, for example, the Loughborough Town Deal Board wrote that the town was experiencing rapid growth, noting that “the population is expected to increase from 67,000 at present to more than 80,000 during the 2030s; a pace over double the national average.”

In addition, the town is served by two colleges and by the well-reputed Loughborough University, which contributes an estimated £940 million each year to the regional economy. The town hosts a number of large employers and, having been awarded £17 million of Town Deal funding in 2021, it is now using the money to support new infrastructure and regeneration projects – schemes that will enhance the urban centre while creating hundreds of new jobs.

Importantly, Loughborough is also part of a wider area covered by the Leicester and Leicestershire Economic Partnership, which has ambitious plans of its own, aiming to increase its economic output from approximately £23 billion to £30 billion by 2030.

All of these factors have the capacity to boost demand for residential property in some way. A rising population will, of course, have a very direct effect and should help to buoy up both rental and capital values over the coming years, particularly in light of the fact that housing supply is decidedly limited. Economic growth and investment will also play a part by creating jobs and attracting new workers to the area, but also by helping to drive up average disposable incomes, which will enable local people to raise their aspirations in terms of how and where they live.

We’ll consider each of these factors in turn.

Population Growth

The town’s population has been growing as a result of ordinary ‘organic’ growth – i.e. because people are living longer and because the local birth-rate exceeds the mortality rate. Partly, too, it’s the result of inward migration on the part of both students and workers.

A section in the 2021 Loughborough Town Investment Plan notes that:

“Loughborough is home to a world class, top 10 university, with cutting-edge research, sport and technology. Together with Loughborough College there is a student population of 27,000 studying in academic and technical education, which swells the population by 40% during term time.”

A strong economy has also helped to create jobs and attract people from outside the area; people who then need homes in which to settle. In 2022, Leicester and Leicestershire Economic Partnership published an economic overview, which identified some of the region’s principal growth industries and the skills that are increasingly in demand.

Growth Industries

According to the LLEP, manufacturing and logistics are two of the area’s most dominant industries, contributing £2bn and £1.9bn respectively to the local economy. Manufacturing has created particular demand for process, plant and machine operatives, and machinery skills are in far higher demand than the national average. Likewise, the transport and storage sector has created many more jobs than the UK average, and warehousing skills have seen the fastest growing demand of any local sector.

In terms of existing employment, other important sectors include:

· Professional: including specialised financial, accounting and auditing skills, scientific and technical activities

· Management and administration

· Health

· Education

· Procurement

In terms of new job creation, the fastest growing sectors include:

· Education

· Information and communication

· Professional, scientific and technical

· Transportation and storage

These last four are significant because they hint at a gradual shift towards higher-value, knowledge-based roles. For property investors, this trend matters because the presence of more people earning higher salaries will usually help to raise demand for newer and better-quality homes. That, in turn, will tend to exert an upward pressure on average rental values and house prices, as more prospective residents compete for a limited number of available properties.

The previously listed sectors pertain to the wider LLEP area but, in Loughborough, the growth of higher-value, knowledge-based industries has been even more pronounced. The local council notes that the borough supports more science-based jobs than any other local authority in the Midlands, and it boasts a higher-than-average proportion of jobs in advanced manufacturing, technology, media and telecoms.

Economic Growth

The town’s economic fortunes have improved in recent years thanks to a number of important funding awards and regeneration projects.

The Town Deal award in 2021 delivered £17 million of funding that has been matched with private and public sector investment to create a regeneration pot worth around £40 million. It is now supporting projects across the town, including a £3 million town centre redevelopment scheme. Charnwood Council writes that “the Living Loughborough project … will see more events held in the town centre, investment in the town markets, expansion of the CCTV system and digital heritage trails added.”

That is just one of 11 local projects. Other examples include:

· The regeneration of Bedford Square, Ward’s End and Devonshire Square

· The creation of a new careers and enterprise hub

· The creation of a digital skills hub at Loughborough College

· Support for a creative arts hub

· Support for the Health and Innovative Loughborough project

· The creation of a heritage locomotive works and education centre at Great Central Railway

· Improvements to other tourist centres and facilities

Another reason for Loughborough’s appeal to employers and workers is its location: it is set within the borough of Charnwood, which has established itself as an Enterprise Zone that supports an active community of 6,800 businesses. The council has stated that it is keen to attract new investment and to enable new and existing businesses to grow. It writes that it is:

“… ensuring that new sites come forward for commercial development and that regeneration schemes provide for new business opportunities, creating an exciting portfolio of sites and premises for business of many sizes across many sectors.”

Loughborough University Science and Enterprise Park

Many local firms also benefit from their proximity to Loughborough University Science and Enterprise Park, commonly known as LUSEP. Supporting over 90 organisations and around 2,500 jobs, it accelerates knowledge-based economic growth by offering world-class research, support for start-ups and access to a steady supply of highly skilled graduates.

LUSEP also offers office, workshop and laboratory facilities for local businesses, and is moving forward with a series of new developments. Examples include an expansion to its SportsPark centre, and the launch of a new hub for research into low-emission technologies.

Again, the growth of the enterprise park – and of many of the businesses that are based there – is helping to boost the local economy and to create more jobs that pay higher salaries. In a town of fewer than 70,000 residents, this is sure to have a positive impact on demand for housing, and particularly for newer properties that are aimed at ambitious young professionals and workers with valuable technical skills.

Regional Regeneration

As an attractive and historic university town, Loughborough often attracts residents simply because they want to make their homes there. In other words, at least some of its inhabitants will have jobs outside of the town and will make a daily commute. Consequently, the town is also well placed to benefit from employment growth and regeneration in neighbouring cities and the wider LLEP area.

Leicester and Leicestershire Enterprise Partnership is managing several important economic growth strategies, covering issues such as construction, energy infrastructure, skills and employment. In the executive summary to its Economic Growth Strategy 2021-2030, LLEP writes that it will continue to support what it calls its “beacon sectors”. They include:

· Space and Earth observation

· Life sciences

· Automotive

· Sport science

· Cyber technologies

It will also aid the expansion of other growth sectors including: ICT, food and drink, logistics, and professional and financial services, together with other key industries such as agriculture, textiles, creative and cultural, construction and the visitor economy.

LLEP concludes:

“Prior to the Covid-19 pandemic, Leicester and Leicestershire generated £24.5 billion in GVA, with 42,000 businesses and 538,000 jobs. As a testament to its resilience and growth potential, we expect this to increase to £30.2 billion and 568,000 jobs by 2030.”

To realise this ambition, LLEP is managing a number of important Growth Fund projects. Collectively, these have already helped to create thousands of jobs and their continuing impact will help to safeguard many thousands more. Examples include:

· The Leicester North West Major Transport Project (£16 million – complete)

· A511 Growth Corridor (£4.6 million – complete)

· National Space Centre: Vision 2025 (£1.1 million – ongoing)

· Great Central Railway / Loughborough Central Station (£1 million – ongoing)

Thes are just a few of the many schemes that are helping to revitalise the regional economy. Other examples include flood defences, transport improvements, new development sites for business, skills training and the roll-out of superfast broadband.

Loughborough’s Housing Market

Across the UK, the property market has been relatively slow in 2023, held back by concerns over the rising cost of living, high mortgage rates and the highest level of household taxation in more than a generation. With less money in their pockets, tenants and house-buyers have been reining in their aspirations and they have been much more careful about their expenditure.

Those affordability concerns put an end to the rapid house price growth of the preceding years and, in many parts of the UK, particularly the southern regions of England, price growth actually turned negative. However, the UK’s more affordable regions fared better, delivering continuing capital growth, even while interest rates were at 15-year highs.

In the East Midlands and regions further north, housing costs account for a comparatively low proportion of average earnings and, consequently, tenants and would-be buyers don’t face quite the same affordability pressures as their counterparts further south. For example, the September 2023 Rental Index from Homelet shows that while tenants in Greater London typically spend 38.7% of their income on rent, those in the East Midlands spend only 29.1%.

It's a similar story when it comes to capital values. According to the latest ONS House Price Index, published in October 2023, the average East Midlands home cost £250,818. By contrast, the UK national average was £291,000 and the average for England was £310,000. In London, the average home cost £535,597 – more than twice the price of a property in the East Midlands.

Those stark differences in affordability have provided more scope for longer-term growth in the UK’s more affordable markets. That is certainly visible at the regional level: according to ONS, average values rose by +0.5% year-on-year in the East Midlands, but by only +0.2% across the country as a whole. However, the differences are even more apparent at the local level.

On 20th September 2023, ONS published its HPSSA Dataset 38, which records mean prices paid on a ward-by-ward basis. The data is the most accurate indicator of real prices paid but it lags well behind other price indices. In this case, it only lists prices up to March 2023, so it doesn’t take account of any subsequent slow-down. Nevertheless, it does offer a revealing comparison, showing how many parts of the Cherwood borough – and Loughborough in particular – outperformed UK averages when it came to price growth.

In the 12 months to March 2023, ONS notes that annual price growth in several Loughborough wards reached well into double figures:

· Loughborough Nanpantan +44%

· Loughborough Southfields +29%

· Loughborough Ashby +19%

· Loughborough Outwoods +18%

· Loughborough Storer +18%

For context, the ONS House Price Index for March 2023 reported that average UK house prices increased by just +4.1% year-on-year.

More recent data will almost certainly show slower rates of growth and it must also be noted that other wards of Cherwood produced significantly lower figures. Nevertheless, the ONS data is the most accurate indicator of prices at this local level and it serves to demonstrate the far superior performance of key wards in the Loughborough area.

In terms of rental growth, too, the East Midlands has been delivering great results for investors. In its Q3 Rental Trends Tracker, Rightmove estimates that rental values rose by +10.4% in the region, which compares against a UK average of +9.3% year-on-year. This is a middle-ranking performance, when set against other regions, but Loughborough itself has been faring considerably better.

In the same report, Rightmove notes that Loughborough produced the UK’s second highest rental growth rate, with asking rents rising by a massive +23.2% year-on-year.

Summary

Loughborough possesses all the key characteristics that property investors value. Its population and economy are growing and, in the face of continuing inward investment, we can expect those trends to persist. As a result, demand for property is likely to rise and that, in turn, should help to drive rents and asking prices higher.

As one of the UK’s more affordably priced property markets, the East Midlands has tended to outperform the UK average on the measure of house price growth and, in certain wards of Loughborough, that growth has been truly exceptional.

Moreover, the combination of fast-rising rents and more reasonable purchase prices has meant that many investors will have enjoyed strong yields. Rightmove estimates that the average yield across the East Midlands was around 6.4% in October, but properties in Loughborough itself can be expected to yield substantially more.

Find Out More

To find out more about investment opportunities in the East Midlands or elsewhere, please call our advisory team on 01244 343 355.

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Spotlight On: Loughborough