We at Tarquin Jones have championed northern property in the UK over that in London for the last couple of years. This can be attributed to a number of factors, but one major reason is the massive regeneration levels being seen in major northern UK cities which can be traced back to the Northern Powerhouse government led project set to bridge the wealth gap between the North and South of England.
In today’s article, I will look at why Northern UK cities are currently where the smart money is going from an investment perspective.
Northern cities leading the way
This year’s earlier price index from Hometrack – (https://www.hometrack.com/uk/insight/uk-cities-house-price-index/february-2018-cities-index/) – confirms what Tarquin Jones have been saying for some time- London and the South have been usurped by northern cities for house price growth.
In Edinburgh, the average house price is 8% higher than it was a year ago. House price growth is not far behind in Liverpool (7.8%), Leicester (7.7%), Birmingham (7.7%), Manchester (7.1%), and Leeds (6.9%).
London prices flat lining
By comparison, prices in the capital are stagnant and a far cry away from London’s reputation as the UK’s premier city to invest in for capital appreciation. Average house prices in London are growing by just 1% (down from 4.3% a year earlier). With yields of 3-4% (if you’re lucky) in and around London compared to 7-8% minimum in major Northern cities like Manchester and Liverpool, the capital at the moment just doesn’t hold a candle to what is being offered elsewhere.
By no means are we saying London is a doomed market and there are hotspots still there experiencing some good levels of growth, the inflated prices ultimately don’t make it as worthwhile as it was. The smart money is going into growing Northern cities undergoing huge levels of regeneration.
HS2 and the impact it’s having
The effects of HS2 are already being felt as major off plan developments are being situated right at the heart of the new high-speed rail network. Major city centres in Birmingham, Manchester and Liverpool are set to undergo huge capital appreciation as a result of HS2 drastically reducing travel times via train.
For example, travel times from Birmingham to London are set to be reduced to a mere 40 minutes via HS2. As such, the demand for property within walking distance of the rail will skyrocket and lead to price increases in these areas.
Meanwhile, businesses will be attracted to Manchester and Birmingham for similar reasons. Indeed, some firms have already begun the relocation process; with Deutsche Bank, HSBC and most recently Channel 4 are relocating staff from London to Birmingham with lower business rates in a growing city being the main attraction.
Where exactly are the best northern hotspots?
Major cities in both the Midlands and the North are where investors are turning to flesh out their BTL portfolio and even base them there. There are many factors as to why this is including:
- Property prices in major northern UK cities are more affordable in comparison to London. Properties in Birmingham and Manchester, for example, are less than half the price when compared to similar properties in the capital.
- Rental yields are better in the northern cities, too, where it is possible to buy an income yield of 8% or 9%. The reason why you’d previously have invested in London was never the yields- more for the capital growth.
- Add the rental yield and price growth together and annual returns are far higher in the cities of the Midlands and the North than they are in London and the South.
What the experts are saying
Russell Quirk, CEO of eMoov, agrees that London is likely to be one of the weakest UK property markets over the next two to three years, but says:
“As we’ve seen over the years, the popularity of the London market is cyclical and while it may have fallen out of favour, for the time being, this cool in price growth is unlikely to prevail as the year plays out and it is highly unlikely we will see a market crash of any shape or form.”
Add to the mix fantastic retail offerings, superb schools and universities, incredible nightlife, sports, and recreational facilities, and you start to see the whole picture. The Midlands and the North are primed with property investment potential.
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