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Investor Update - November 2015

By Nick Gale

With the recession fading into the past and, after several years of healthy growth in property investment and near boom conditions in the Bath area, maybe it's time to re-assess potential for returns over the mid-to-long term.

Bath has delivered healthy returns over the last few years helped by a burgeoning private Lettings market to wealthy (mainly overseas) students and also the arrival of several new developments in Bath which have most fortuitously, these modern tenants with just the accommodation that they require. By far and away the largest development is by Crest Nicholson Regeneration at Bath Riverside. Just a few minutes walk from Bath city centre and the main Sainsburys supermarket, it is also seconds from the main bus routes to both Bath Universities whilst enjoying a fairly tranquil riverside position as its name suggests. Bath Riverside has consistently provided not only gross yields of over 5% (historically, quite high for Bath) but also much more surprisingly for those who wanted to sell, price increases of 12-14% in the last 3 years, quite a bonus!

But can it continue?

Let's look at the fundamentals. The city of Bath generally is in great shape, employment is low, the world and his wife wants to come and live here, especially young families moving out of London looking for the best schools as well as professionals moving to the region, they all see Bath as the best base to live their busy lives. What about the all-important wealthy student market? The number of students looking at Baths' universities continues to increase and short of a national policy change we won't see their numbers going down, on the contrary their numbers will rise inexorably. Both of Baths universities are building like billio and of course there'll always be a market for that type of student accommodation but here at Crisp Cowley we can see that as the middle classes of China, Brazil and India continue to expand so do the number of wealthy individual students who arrive at our office looking to replicate 'home' by renting a modern looking secure apartment with all mod cons.

The days when six students were prepared to share a microwave and a freezer compartment in Oldfield Park are on the way out. As your average student becomes wealthier and wealthier they'll be looking for something much much better than that.

Some may argue that Crest Nicholson still have a lot more apartments and houses to build (they are currently about one third of the way through building approximately 2000 units in total) but from what we at Crisp Cowley have seen, the demand will be there.

We believe that prices will continue to rise but Gross yields will be maintained if you buy with sensitivity to today's Lettings market and remember who your modern tenant is likely to be. Rents are and will continue to edge up. Once interest rates start to rise (surely they must at some point) then even more tenants will enter the Lettings market as young professionals return with a vengeance and compete for the best apartments and homes with all those students- then rents really may well take off.

Bath is a small city surrounded by green belt and the Bath Riverside site is probably the very last residential development of its size that will ever be released into the private sector - maybe you should grab a piece of it while you can!