The north-south divide: are property investors still interested in London?

 

In the past, when you thought of property investment you probably thought of London first. But growing numbers of property investors are thinking outside the box when it comes to location.

London will always be one of the favourite investment hotspots in the UK, particularly with overseas investors. It is one of the world’s most important business locations, with a strong economy, job prospects and investment outlook. In terms of the housing market, for those who have owned property there for many years, house prices have skyrocketed.

In Hackney, for example, property values have risen by 568% over the past 20 years (Cushman & Wakefield). Even in prime central London, which was already at the top end, house prices have risen by 421% over the same period.

However, although it still has extremely strong investment prospects, the situation has been shifting for a while now. Affordability in London seemed to reach a ceiling, and it became an area with some of the slowest house price growth in the UK. The EU referendum may have played a part, as well as the fact that the government and private investors are more intent than ever now on ‘evening up’ the country’s north-south divide. As more investment and regeneration comes to the north of England, it becomes an ever more appealing place to invest, live and work.

The new favourite for property investors

Some new research published by major London estate agency Hamptons International highlights this trend. It shows that since 2010, there’s been a 31% decline in landlords investing in the capital. By contrast, London property investors buying in the north and Midlands has risen by 34%.

What’s more, over the past year alone, the number of London-based investors buying elsewhere increased by 34%. Around 41% reinvested in the capital, but this is down from 75% in 2010.

The big winner in terms of regions was the north-west of England. Since 2010, this area has seen the biggest rise in property investors choosing to buy there (+9%).

A major draw for the north-west is the affordability of housing there. According to Hamptons, house prices in the north-west are an average £152,340, compared to £353,400 in the south-east. When you add stamp duty to the mix, with the 3% surcharge, there are big savings in buying in the north.

The Northern Powerhouse initiative has also brought more investment to the area, and the north in general. The idea of devolution away from the capital, and more government spending in northern towns and cities, has begun to create more of a balance across the country.

What about where people want to live?

Recent events have certainly caused many people to rethink their living situations. Rural locations, outside space, and more interior space have all shot up people’s priority lists. The advent of working from home is also likely to transform many people’s location choices.

However, the “London exodus” has actually been taking place for a number of years. Greater numbers of young professionals are choosing locations in the north and the Midlands because the job markets and housing markets there have vastly improved over the years. It therefore makes sense that property investors are keeping a close eye on these locations, too.

According to Hamptons research: “A growing number of thirtysomethings are all looking further afield – especially since working remotely has proven itself such a thoroughly practical reality.

“In fact, the age of buyers looking to leave London is falling just as fast as their numbers are rising. Today, the average London leaver is just 39 years old, down from 49 a decade ago.”

And it is the north-west that again has proven itself to be the favourite relocation region for Londoners. Hamptons data shows that the number of London leavers moving to the north-west has risen by 6% over the past five years. This is the highest increase across the country, and the top location for Londoners to move to is Liverpool.

Property investors looking for yields

While London will probably always be the favoured property investment hotspot overall, it may not be the top spot for yields.

Continuing on the above theme, landlords looking for the highest monthly returns can expect to find them in the north-west, and Liverpool in particular.

The latest research from online mortgage broker Mojo Mortgages shows that landlords in the L7 postcode can achieve average yields of 10.3%. The average price of a property in this area is well below the UK average at £95,000. Also scoring highly were L6 with 8.4% yields, L1 with 8.1%, and L15 and L4 both with 7.4%.

Manchester’s M14 postcode also appeared in the top 20 with average yields of 7.6%. The postcode covers the popular Fallowfield area, while Manchester as a whole sees massive rental demand each year.

Nick Sherratt, MD and co-founder of Mojo Mortgages, said: “Our research has shown that there is a clear north and south divide, with areas in Scotland and the north-west, Liverpool in particular, generating strong yields. Property prices in the north are also known for being low, therefore, making these areas incredibly investable.”

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The north-south divide: are property investors still interested in London?

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