The South Yorkshire town of Rotherham sits between Sheffield and Doncaster, both of which are popular property investment destinations in their own rights. Also within a modest 25-mile radius from the town are several other investor hotspots that we have previously featured: Retford in Nottinghamshire, and the Yorkshire towns of Huddersfield and Halifax.

Each of these markets shares some important traits. Like Rotherham, they are characterised by affordable prices, strong rental demand and inflation-beating rates of rental growth. The region as a whole has outperformed UK averages in terms of rental returns, gross yields and capital appreciation. As ever, returns vary by location, of course, but there are good reasons to regard Rotherham as one of the area’s most promising property investment choices for 2024 and beyond.

Rotherham – an Overview

According to the Office for National Statistics, the population of Rotherham borough has increased by +3.3% over the last decade. That’s a faster rate than in either Doncaster or its nearest neighbour Sheffield and, in absolute terms, it means that it is now home to approximately 265,800 residents.

The town itself is somewhat smaller than the borough. However, thanks to an ambitious economic growth plan, the local population is likely to grow steadily in the coming years, adding to demand for residential property. Rotherham Metropolitan Borough Council notes that by 2025, it aims “to deliver 10,000 net new jobs in the private sector… and to create 750 additional new businesses.” Such growth is likely to draw in new workers from outside the area, while also helping to boost the average earnings of people already living in Rotherham.

The town is also benefiting from a £19.5 million town centre redevelopment plan, which seeks to improve the town’s amenities in terms of leisure, culture and retail. Moreover, Rotherham is a key component of the South Yorkshire Mayoral Combined Authority, formerly known as Sheffield City Region, and as such, it is benefiting from large-scale infrastructure spending and inward investment. This all lends weight to expectations for further growth in employment and a rise in the number of people seeking good quality accommodation in the town.

We’ll consider these and other factors in the following sections:

Economic Growth Plans

On this point, it’s also worth noting that these job creation figures relate only to the local council’s own targets. One cannot overlook the fact that Rotherham is also an important and connected player in a wider regional economy that also intends to support a sharp rise in employment. In its Strategic Economic Plan, the Combined Authority writes:

“Implementing its 20-year Strategic Economic Plan will mean by 2041 the South Yorkshire economy will look very different, with an extra £7.6bn GVA, 33,000 extra people in higher level jobs, reduced income inequality and improved wages.”

Other growth targets include:

Tripling the region’s investment in research and development, from £323 million to £1.1 billion per annum.
Enabling 30,000 people to gain higher levels skills and move into better-paid roles.
Investing in a net-zero carbon future.

It is also important to recognise that the town is building its expansion plans upon a solid foundation. According to the South Yorkshire Mayoral Combined Authority’s Evidence Base, GVA per head has risen by +16.6% since 2011, which is faster than in either Sheffield or Barnsley, and employment in the town has risen by +14.4% over the same period. Again, this is faster than in any of the combined authority’s other areas: Sheffield, Barnsley or Doncaster.

This success matters for property investors because not only will an increase in employment mean more people seeking homes; it also means that existing residents should see an improvement in their disposable incomes. Any such trend generally translates into more demand for better homes, as people raise their domestic aspirations, and the effect of that is to exert upward pressure on both rental and capital values.

Population Growth

Over recent years, the growth of the town’s population has been steady but not dramatic; it has stayed close to the UK national mean. However, even if that rate were to remain at or around its current level, that would still put considerable added pressure on an already strained supply of housing. It would raise the population to 290,000 by 2043, which would create a need to home an estimated 35,000 extra residents.

In reality, the population looks likely to increase significantly faster than that, as economic growth plans begin to take shape. Certainly, if local economic planners can generate anything like an extra 10,000 jobs, then at least a portion of those would be taken up by people from outside the area. That, in turn, would translate into another hike in demand for property.

Growth Industries

One of the ways that local economic planners can drive income growth is to encourage people to develop higher-level skills and to move into higher-value, knowledge-based roles. In the South Yorkshire region, that transition is already well under way.

Across South Yorkshire, the number of people in higher level occupations has risen and average earnings have grown accordingly. Local councils have given the green light to new business and manufacturing hubs, while many of the region’s biggest universities are using technology transfer programmes and business incubators to support the launch of new, high-value enterprises.

Perhaps the most notable of these many measures is the launch of the UK’s first Investment Zone, announced in July 2023 by Combined Authority leaders and the Chancellor Jeremy Hunt. Supported by £80 million of government funding, the programme is expected to create 8,000 new jobs for South Yorkshire and to attract £1.2 billion of private investment before the end of the decade.

Importantly, the strategy behind the decision puts a strong emphasis on building strong, higher-value, forward-looking industries. High on the agenda is advanced manufacturing and, accordingly, the first development to be supported is a new £80 million research project by Boeing, which is seeking to manufacturing lightweight structures for aircraft. Other growth sectors likely to benefit include artificial intelligence, materials science, robotics, the life sciences, low-carbon technologies and the automotive industry.

Planners have noted that “South Yorkshire’s Advanced Manufacturing Innovation District (will expand) to incorporate Rotherham town centre and Sheffield city centre, with opportunity sites across Barnsley and Doncaster.”

Rotherham Metropolitan Borough Council Leader, Cllr Christopher Read, said:

“We always welcome any investment into our region, and as a Council we have already secured millions in funding into our borough for our communities. (This) announcement builds on the successes of the Advanced Manufacturing Park and other big-name companies who have also chosen to invest here. Our new manufacturing economy is helping to bring more high-paid jobs to Rotherham and the Investment Zone agreed for South Yorkshire … demonstrates the national significance of this.”

In terms of employment, other important growth sectors include:

Arts, entertainment and recreation
Health
Finance and insurance
Food and hospitality
Transport and logistics

Rotherham Town Centre

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

In 2021, Rotherham was awarded £31.6 million for town centre improvements via the government’s Town Deal programme. It came in response to the council’s Town Investment Plan, which set out a number of ambitions to be delivered within five years. They included:

Creating new public spaces
Creating improved routes for pedestrians and cyclists
Completing critical flood defences
Improving access to the waterfront
Creating a Riverside Residential Quarter
Repurposing derelict buildings on High Street and Corporation Street
Regenerating the Guest & Chrimes heritage site
Improving connectivity for Eastwood
Establishing a new business hub in Templeborough, including new spaces for hospitality and meetings
Building a new gateway from the Minster Gardens to a new leisure development at Forge Island
Advancing plans for a new mainline railway station

This represented the first key influx of town centre regeneration funding. The second came in January 2023, in the shape of a £19.5 million award via the Levelling Up programme. Announcing the decision, Rotherham Council noted that this was one of two successful funding bids. It wrote:

“Almost £40 million has now been agreed to help improve Leisure Economy and Skills in the borough and Rotherham Town Centre. The Leisure Economy and Skills bid for £19,990,000 aims to build a new leisure industry that responds to the challenges of economic recovery and health and well-being. It includes funding for improved stables at Wentworth Woodhouse, a new café at Thrybergh Country Park, new exhibitions at Magna and a new Village Centre at Rother Valley Country Park.”

“The £19,549,059 bid for Rotherham Town Centre aims to continue the regeneration of Rotherham Town Centre, focussing on two key areas: the Riverside Residential Quarter and the Leisure and Culture Quarter. This investment will complement and add value to the investment from the Future High Street Fund and Towns Fund.”

The third and most recent development was a government announcement concerning further Levelling Up funding in the form of a £20 million endowment. The Department for Levelling Up, Housing and Communities noted that the money was “to be spent on local priorities; reviving high streets and own centres… improving transport and growing the local economy.” The ruling also gives local planners more powers, such as to auction empty high street shops, and to change licensing terms for shops and restaurants.

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Digital Connectivity

A further reason for expecting substantial economic growth in Rochdale is the roll-out of fibre broadband. Estimating its impacts, the principal investor, CityFibre, quotes findings by the research consultancy Hatch. It notes that

“over a fifteen-year period, the positive impacts of the £29 million investment in Rotherham will include £284 million in productivity and innovation gains, £62 million from a widened workforce, £17 million in local authority efficiency savings, and £145 million in increased housing value.”

Concentration of Funding

It’s clear that many millions are now being invested into Rotherham, and the results – in terms of employment, earnings and economic growth – can only be positive. Securing well over £120 million of public sector investment in the space of just three years is impressive by any standards, but all the more so when one considers that it’s being focused on a town borough with a very modest population. Such a concentration of spending is bound to deliver a stark and positive transformation, making Rotherham an increasingly attractive place in which to live and work.

At both the local and regional levels, economic forces are at work that should accelerate population growth, boost average earnings and gradually attract more and more people to the town. That, in turn, should heighten demand for accommodation and create steadily improving conditions for investors.

Rotherham’s Housing Market

For most of 2023, the cost-of-living crisis has dampened activity in the housing market and, in many regions, capital growth rates have remained close to zero. However, results have been better in Britain’s more affordably priced markets, and this has certainly been true of Yorkshire & Humber.

At the time of writing, November 2023, Rightmove’s latest House Price Index reports that average values in Yorkshire rose by +0.2% year-on-year, whereas they fell by -1.3% across the UK as a whole. The Home Asking Price Index records a more pronounced difference: growth of +1.3% in Yorkshire & Humber, but a decline of -1.6% across the country as a whole.

Many commentators ascribe the resilience of more northern markets to better affordability and the effects of higher mortgage rates. When interest costs rose in the early parts of 2023, the people feeling the greatest impacts were those seeking the highest-value mortgages, and those are typically required in the UK’s more southern regions. That difference has given rise to a clear North-South divide, with regions such as Yorkshire & Humber, Scotland, the North East and the North West producing the most impressive rates of capital growth.

The same affordability issues have also affected rental returns and yields. The regions producing the strongest rental growth were those same northern markets (together with London, which has also fared well over in the second half of the year.) Similarly, the more affordable regions have also tended to deliver the most rewarding gross yields.

According to Homelet, Yorkshire & Humber has seen rents rise by +11.0% year-on-year although, at an average of £875 PCM, absolute rental values remain affordable by national standards. Rightmove reports a slightly slower growth rate of +9.6% but this is still well ahead of the UK mean, and the agency adds that gross yields in the region are averaging at a very respectable 7.2%.

So much for regional averages. At the local level, Rotherham is looking like an especially good pick for 2024, particularly around the fast-regenerating town centre. 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 indices. 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 and, in this case, it shows that Rotherham’s three most central wards produced some of the fastest capital growth rates in the region:

Ward Year-on-year price growth

Rotherham West +10.8%

Rotherham East +8.1%

Boston Castle +17.7%

For context, the ONS House Price Index for the same period reported that average UK house prices had increased by just +4.1% year-on-year. More recent data will show slower rates of growth and it should also be noted that other wards in and around Rochdale 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 town centre’s impressive performance.

Summary

Rotherham makes an attractive target for forward-looking property investors. Most obviously, prices are very affordable by national standards, Most indices estimate the average local asking price at somewhere between £170,000 and £180,000, whereas they offer a UK average of between £350,000 and £365,000. The figures vary by source but they all tend to suggest that prices in Rotherham are around half of the national mean.

The consequence of that affordability is that property values have had more headroom to grow and capital appreciation has continued here, whereas in many southern regions it has stalled or even reversed. For the same reasons, rental growth has risen more strongly and yields have tended to be considerably better too.

Of course, much the same could be said of many northern towns and cities where asking prices have been relatively low. What distinguishes Rotherham now, in the final quarter of 2023, is the potential for growth in the coming years. Huge amounts of investment are pouring into the town and its surrounding region, and the money is set to drive the expansion of higher-value, more ‘future-proof’ industries. With that should come more jobs and higher disposable incomes.

Investors will recognise this as a recipe for rising demand on the part of house-buyers and tenants. That demand, when coupled with distinctly limited supplies of housing stock, should create growing competition amongst would-be residents, and that – ultimately – should push rents, yields and property values steadily higher.

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Spotlight On: Rotherham