What does the rental market look like for Derby in the future?

Unlike capital growth, which benefits you upon sale, rental yields offer flexibility. They can be reinvested, used as a financial safety net, or used to pay off the mortgage, providing leverage.

Despite significant growth over the past five years, Derby remains one of the UK's most affordable locations, a key factor for achieving better rental yields. According to ONS data, the East Midlands, including Derby, saw impressive growth in property prices and rents in 2022. This growth is accompanied by a substantial population increase, with Derby's population rising by 12,600 between the 2011 and 2021 censuses. This trend is expected to continue, with Derbyshire's population projected to grow by 100,000 by 2043.

This anticipated growth will heighten competition for rental units, enabling investors to generate higher rental returns and supporting rising property prices in Derby.

Derby is also undergoing significant development through the Derby City Centre Masterplan, a phased project to enhance city amenities, meet tenant demands, and encourage population growth. The plan aims to attract £3.5 billion in investment, create 4,000 job opportunities, and build 1,900 new homes, all of which will drive population growth and increase rental yields.

Average Rental Yields in Derby

Average Property Price (Rightmove, September 2023): £239,700
Average Rental Yield (PropertyData): 3.95%
5-Year Rental Price Growth: 15.1%
The average rental yield in Derby is 3.95%, based on PropertyData's average yield from all postcodes. Derby properties are relatively affordable compared to the UK average property price of £279,569 (Halifax), making them a more accessible investment.

Considering the supply and demand imbalance—20,000 people in Derbyshire are on social housing waiting lists, and 20 renters compete for each PRS unit—along with long-term regeneration creating new amenities, Derby's rental yields are trending positively.

According to JLL, UK average rents could rise by 12% by 2026, offering significant potential for investors in buy-to-let hotspots like Derby. JLL also predicts a 16.5% rise in East Midlands property prices between 2024 and 2027, likely boosting rental growth. The East Midlands is expected to outpace all regions outside London for projected growth, making it an appealing investment alternative to the more expensive South East.

Factors Affecting Rental Yield

Several factors impact rental yield, including supply and demand, the investment's surroundings, property price, and tenants' willingness to pay the rent charged.

Supply and demand have the most significant effect. A competitive market can support rising rents and property prices, especially if attractive amenities are being developed.

Researching future development pipelines—residential, commercial, or public—is essential to ensuring sustainable demand in your investment area.

Career opportunities nearby can also positively impact demand and rental yields. Investing in a city with many high-level employers means potential tenants with higher incomes, leading to better rental yields.

Graduate retention is another factor. Today's graduates are tomorrow's young professionals, a significant portion of the UK rental market. With the University of Derby hosting 34,000 students and numerous job opportunities on the horizon, Derby is highly appealing for graduates.

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