Why supermarkets matter to property investors
Property investment opportunities are heavily reliant on the property fundamentals – shops, schools, transport links, major employers and major investment. Now, thanks to research conducted by Lloyds Bank, we can tell you what effect being near a supermarket has on investment property values. We can even tell you which supermarkets affect prices the most.
nvestment properties near supermarkets command premium prices
Investing in a buy-to-let property near a supermarket will cost you more than buying a similar property a few miles away. Across the whole country, Lloyds Bank has found the ‘supermarket premium’ averages £21,512. But this average doesn’t tell the whole story.
There is a huge variance in the value effect. It depends on the area, and the supermarket nearby. Properties near a Waitrose tend to be most expensive. And while properties near an Aldi tend to be cheaper, the rate of their price growth in the last three years is closing the gap.
Why are properties near supermarkets more expensive?
The benefits of living near a supermarket can be summed up in three words: time, convenience, and social.
People’s shopping habits lead to a supermarket trip at least once a week. The further away from shops you live, the more time it’s going to take you to do the weekly shop and make those ad-hoc shopping trips. If you live ten minutes from the supermarket, a weekly visit will eat up 20 minutes of travel time per week. That’s 1,040 minutes per year. Live 25 minutes away, and this travel time increases 2,600 each year. That’s 26 hours more travelling for groceries every year.
Having a supermarket on your doorstep is also convenient. I can’t tell you how many times I’ve been sent out for a missing ingredient, or essential supplies of which we’ve suddenly run short. A supermarket on the doorstep is the height of convenient living.
Finally, people who love social gatherings need to live near a supermarket. Especially in England, in the summer. The impromptu barbeque party is far easier to arrange with a supermarket around the corner. And if there are more guests than you expected, it’s easy to pop to the shop to bolster supplies.
It’s these benefits that increase demand for property near shops. And higher demand equals higher prices.
For super premium property prices, buy near premium supermarkets
The highest-priced properties near supermarkets are found near premium brand supermarkets. Those investment properties near a Waitrose are the most expensive, at an average of £429,118. In second and third position are areas with a Marks & Spencer and Sainsbury’s, with average prices of £350,263 and £314,154 respectively.
Properties near discount supermarkets have increased fastest
The research conducted by Lloyds Bank examines prices between 2014 and 2017. It discovered that properties near a Waitrose are more than double the value of properties near and Aldi: £429,118 versus £198,810.
However, in percentage terms, the rise in the values of properties near a discount supermarket has outstripped that of the rise in the average value of property near a Waitrose:
- In 2014, an investor buying a property near a Waitrose store would have paid an average of £396,104. Since then, this average price has increased by 8%.
- During the same period, the average value of property near an Aldi increased by £20,000 – or 11.2%.
- Properties near a Lidl store increased from an average of £216, 258 to £239,981 – an increase of 10.9%.
You need the most money to invest near a Waitrose in the North West
In eight out of ten regions in England and Wales, properties near a Waitrose command a premium price when compared to other properties in the same town.
The largest cash premium for properties near a Waitrose is found in the North West. There, you’ll need an average of £80,772 more to invest in a property near a Waitrose store. It is a premium of 38% on other properties in the town. The next highest Waitrose premiums are found in the West Midlands (£76,812) and Yorkshire and Humber (£53,924).
If you can, invest near a supermarket
If you invest in an area with more than one supermarket, you’ll probably have to pay an even larger premium. For example, Lloyds Bank also found that eight of the ten locations with the highest premiums benefited from a Waitrose, Sainsbury’s, and Marks & Spencer.
However, this doesn’t mean investing near a discount supermarket is to be avoided. Indeed, if you have a more limited investment budget, your best ‘supermarket’ strategy may be to buy near an Aldi, Lidl, or Tesco. If recent history repeats, you could benefit from faster price growth compared to properties a little further away and those more expensive properties located near a premium supermarket.
The message for property investors is clear: invest near a supermarket. While the price you pay will be higher, the value of your property is likely to grow faster. Also, you may find the supermarket price premium is reflected in a supermarket rent premium.
When we search for property investment opportunities for our investor clients, the proximity of shops and supermarkets is one of the property fundamentals we investigate. Our unique Hotspots Algorithm examines 108 data points across 324 areas in the UK. It allows us to pinpoint those locations which are likely to outperform. For more information, contact one of the Gladfish team today on +44 (0)207 923 6100.
Live with passion