Could property investors get the Devon cream?

Exeter and Corby are two cities that are fast becoming investment hot-spots. Graham Norwood reports

The far South-west of England has long been a "soft" residential investment option thanks to its glut of second homes and readily available holiday cottage complexes. But now it has its first "city centre living" investment opportunity thanks to the regeneration of Exeter and demand from a population swelling in number thanks to firms moving in from outside of the region.

The city's 117,500 population first became the target of property investors back in 2003 when the Met Office moved from the South-east to Exeter, bringing 1,000 staff and causing a direct increase in house prices when demand exceeded supply. Landlords stepped in fast to meet the shortfall. Since then, the city's economic boom has continued. Flybe, the budget airline based at Exeter, has taken over BA Connect and is enlarging its city workforce - they will be among 7,000 new jobs created in business parks at or near the airport on the city's edge.

In the autumn, the £135m Princesshay shopping and restaurant complex will be completed near Exeter Cathedral, replacing an eye-sore post-war scheme. And up-market regeneration specialist Urban Splash is to transform a soon-to-be redundant city centre high-rise office complex into Exeter's most expensive and luxurious apartments.

Add to this mix the fact that there are few sites for substantial new housing in the centre of Exeter, and it is therefore little wonder the local market has taken off with indicators suggesting more above-average growth in the long term.

Since 2000, Exeter house prices have increased by an average of 124 per cent - more than its larger regional rival, Bristol, or even Cardiff - and by early 2007 a typical two-bedroom city centre apartment cost £227,000, up 11 per cent on a year earlier according to estate agent Knight Frank.

Predictions from the city council and the Department of Communities and Local Government suggest that Exeter's population is set to grow by 21 per cent to 143,000 by 2029, much of it caused by inward migration through future corporate relocations. In addition to those firms already stating their intention to move to Devon, the city council is lobbying for civil service jobs to be devolved from London and Bristol to inside its boundaries. The result is likely to be more house price rises.

All of the first 32 flats within phase one of Princesshay's residential element sold out within 30 minutes of them going on sale earlier this year and the remaining 98 units are expected to be similarly popular.

Aside from the new city centre, Exeter's most desirable residential areas include Pennsylvania - popular with lecturers at the nearby university - where 1930s houses hit £550,000. Meanwhile on the south-eastern fringe of the city is Topsham, a 14th-century estuary port where Dutch-influenced period houses go from £400,000 to £1.25m, while to the east of the city a new town is planned to help meet the demand for homes.

Would-be landlords now have choice in the far South-west - city living, as well as holiday homes, could provide Devon cream for canny investors.

Expect more from your money in growing Corby

The actor Stephen Fry is an unlikely property pundit but you could do worse than follow his advice and look at Corby, the former Northamptonshire steel town that may just be a new investment hot-spot.

Fry is the voice behind a vigorous radio campaign promising "more room to breathe" and, crucially, "more for your money", where four-bedroom houses can still be snapped up for £185,000.

At the turn of the millennium, Corby was regarded as a town that had not recovered from its collapse as a steel centre in the Thatcher era. House prices were ultra-low but, according to the Halifax, they had shown no significant growth for five years.

But since then things have changed. The town's designation as a growth area for homes and jobs in the expansion plan for Milton Keynes and its surrounding area back in 2002 has prompted significant investment from regeneration bodies such as English Partnerships.

To meet the planned 28,000 new homes in Corby - almost doubling its population to about 100,000 by 2020 - developers have piled in. Despite the increase in homes, demand continues to expand too.

A major attraction for investors has been recent capital growth. For example, three-bed houses at Oakley Vale - the largest of the town's new homes sites - have risen from £105,000 in 2001 to approximately £155,000 today. Even so, prices remain well behind other comparable East Midlands locations, let alone those considered within commuting distance of London - Corby to the capital is 65 minutes, via Kettering.

Now Corby's infrastructure is improving too. The North Northamptonshire Development Company, which is co-ordinating public and private regeneration in Corby, says the town now has 23 separate projects to encourage business investment, create jobs and improve schools.

So far this year alone, planning permission has been given for a £32m "civic hub" including a theatre, library, café and rooftop restaurant - all due for completion in 2009 - along with an £18m swimming pool and fitness centre to be ready next year. This comes on top of a £35m shopping centre, Willow Place, currently being built to replace the down-at-heel retail area that blighted the town in recent years.

The A1 and M1 are within 30 miles and the A14 only nine miles away. The nearest major railway station is Kettering, some 15 minutes away by car.

"Corby's very affordable compared to surrounding towns like Wellingborough, Market Harborough, Milton Keynes, Kettering and the like," says Liam Bailey of estate agent Knight Frank. "The A14 corridor northwards is set for a lot of development over the next decade, and Corby will be seen as a town with housing to serve its own economic growth and that of larger locations like Leicester and Peterborough."

He says because of low purchase prices - at least for now - investors are likely to get 5 per cent gross rental yields or above, beating the national average.

Stephen Fry, it seems, may be quite a property pundit after all.