Investors are quickly wising up to excellent returns in selected regeneration areas a new report has indicated.

Some of the nation’s regeneration areas far outstrip national house price growth, says property investment group Assetz, who recently launched a new residential property fund specifically focusing on such zones.

Regeneration areas such as London’s Elephant and Castle, Stratford in East London and parts of Manchester city centre, which have well-funded development plans in place, are proving irresistible to investors with a 5 - 7 year view.

Property is usually available at below city-average prices, with expectations for above-average growth when the area becomes more attractive. House prices in the regeneration area would be expected to rise over a few years up to the city average as the redevelopment takes place, giving the investor additional capital gain.

Stuart Law, managing director of Assetz commented: "The discount in prices compared to the rest of the city means that the investor has a safety cushion, should prices in the surrounding city suffer a downturn."

Areas of cities that are run down but in good central locations often present good investment opportunities, especially if they are surrounded by more upmarket areas that are already popular places to live. Property can be found at very reasonable prices, often up to 10-20% lower than in the fully developed area of the city. However investors need to do some careful research and check that there is a well-funded redevelopment plan in place.

Local government often helps fund regeneration with initial subsidies by way of providing infrastructure such as buses, trams and local transport extensions, as well developers or local government often adding green open spaces such as parks that will make the area more desirable. It is important to make sure this plan is actually in place rather than just being in the planning stages, otherwise it could take years for prices in the area to rise.

When developers move in they drive the regeneration process, improving the area and providing infrastructure for the properties they are building. "Investors can choose whether to invest in existing housing which will rise alongside the more expensive new build," said Stuart, "or buy new properties that will attract incoming tenants looking for a less expensive area within the city."

The Assetz Residential Property Fund focuses on regeneration zones within the UK and allows investment from a minimum of just £5,000. Potential gains will arise firstly from buying apartments off plan for a 10 – 15% discount from the market value, secondly from focusing on regeneration areas where property costs 10 – 30% less than the rest of the city and thirdly from the prospect of positive growth in house prices.