What is the average return on property investment?

Understanding how much money you could make from Investing in Property is key to helping you make the right choices.

The return on property investment is used to measure how much profit is made on a specific investment and represents a percentage of the total investment cost. In a mature market, where no significant price fluctuations are happening, a good return on property investment should be around 7%.

When buying property, an individual makes a profit either by selling the property for a larger price or by earning rental yield, which represents the rent your tenants pay, minus maintenance costs.

The ROI (Return on Investment) can be influenced by a number of external factors and not always in ways you would expect. London, for example, which is a very big and expensive city where rent prices are high, would be expected to have a high ROI, but it sits as low as 3%.

However, in cities such as Newcastle upon Tyne and the areas surrounding it, where life is not as expensive, investors can get an ROI of up to 10%, which is a significant upsurge from the average 6% nationwide. Let’s take a look to understand why.

Newcastle’s real rental market

Various reports put Newcastle amongst the best cities to own a buy-to-let property in the United Kingdom, with an average 8.5% yield. This happens because the city has become a true student hub thanks to its two universities that attract thousands of young people each year.

The average housing price in Newcastle’s City Centre, which is one of the most popular areas for students looking to rent a property, sits at £273,946. With an ROI of at least 8%, it is easy to see why so many investors are looking to acquire buy-to-let properties in this area.

Rental demand is also on the rise in Newcastle and will continue to be this way for many years to come. Over 100,000 students live in and around Newcastle, and the total number of households is projected to rise to 137,471 by 2030 – a 12% increase from 2015.

Property price insights

To get an even better perspective at the average ROI on properties in Newcastle, we need to take a closer look at the market.

On average, a flat in Newcastle costs around £99,000 and can grant you a gross yield of about 7.9%. A studio, on the other hand, can be even cheaper (£70,000), but get you a gross yield of about 8.2%. Both of these options sit under the average house price in the area, so they are not only affordable but can generate a big ROI.

Median asking rent continues to grow as well in Newcastle, reaching around £588 in 2019 and £750 PCM in recent months. Even for a single room, the median rent seems to sit at £399 PCM.

All of this information shows that the average return on property investment is high in Newcastle, especially compared to the nationwide average, so it is a very suitable option for those looking to secure a buy-to-let property. However, to make the most out of a property, a landlord knows they need to invest both time and resources into managing the property in the best way possible.

Walton Robinson
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