1. More than a capital city
Historically, London has taken most of the limelight.
The performance of the UK property market is traditionally driven by the affluence and international appeal of the capital city, as well as the high-yields and affordability of the north.
However, properties in the UK are set to rise by a promising 56% over the next decade, and London is bringing that average down.
So far in 2017, we’ve seen the Midlands take claim to some of the highest annual house price increases, and properties in the North East grown almost £10,000 since September 2016. Northern cities such as Manchester, Liverpool and Sheffield are still producing some of the highest yields, and new hotspots are emerging from all corners of the UK. Salford, for example, has a “real yield” (rental yield plus capital appreciation) of 32.3%, the strongest the UK has to offer.
The truth is, the UK property market is becoming much more nationally balanced, and whilst London and Oxford are still the most expensive cities in the UK, investors are now looking nationwide for the best yields, house price growth, and entry points.
2. The UK Housing Shortage
Demand for UK housing is outstripping supply, with UK housing listings now at an all-time low. With an average of 43 properties per estate agency, unparalleled demand is maintaining high and growing house prices. As a result, first-time buyers and a half of 18-34-year-olds no longer see buying a property as a viable next move and have accepted renting as the only realistic option for the foreseeable future while real estate prices continue to grow. With organisations such as the Royal Institute of Chartered Surveyors calling upon the government to encourage building and investment, the government has now pledged to build one million new homes by 2020.
Opening up councils and local governments to foreign investment will also help to meet this demand, helping to futureproof the ‘built-to-rent’ property market in the UK with strong tenant demand far into the future. There has never been a better time to secure quality assets in city centre locations
3. The Northern Powerhouse
“I don’t want to see our country dependent on one city anymore. I want to get all of our great cities firing on all cylinders to rebalance our economy” – Theresa May, UK Prime Minister, on the Northern Powerhouse
In September 2016, former Chancellor of the Exchequer, George Osborne took up the role of chair of the Northern Powerhouse Partnership. The body aims to bring together businesses and local politicians to commission research, share ideas and lobby Whitehall to press ahead with devolution. Major initiatives are already underway including the High Speed 2 rail line, regeneration schemes and science and innovation projects such as the National Graphene Institute, Square Kilometre Array and National Biologics Industrial Innovation Centre. The result is job creation and economic growth in the northern region beyond London, providing a timely opportunity for investors to take advantage of emerging economic conditions.
4. High Speed Rail 2 – Connecting the UK’s Economy
High Speed 2 (HS2) is a planned highspeed railway in the UK linking London, Birmingham, the East Midlands,
Leeds and Manchester. The project forecasted to cost £55.7 billion -will be the 2nd high-speed rail line in Britain after High Speed 1 (HSl) connecting London to the Channel Tunnel.
The line of the HS2 will be built in a “Y” shape, with London positioned at the bottom of the ”Y”, Birmingham at the centre, Leeds at the top right and Manchester at the top left. Work on the first phase is set to begin in 2018, with plans to reach Birmingham by 2026 and Crewe on the left leg of the “Y” by 2027. The whole network is expected to be completed by 2033.
HS2 will be developed in two phases. Phase 1 is from London to the West Midlands and phase 2 from the West Midlands to Leeds and Manchester. The concept of HS2 sees all major cities covered along the line served by a city centre station. Liverpool along with London, Birmingham, Manchester and Leeds is envisaged to have a city centre HS2 station, and by 2033 they all will.
The whole network will cut down travel times immensely between some of the most sought-after British cities. On top of that, HS2 will bring new business opportunities and continued growth to the cities along its route. Already, some of the smaller stops along the HS2 line such as Preston, Wigan, Chesterfield and Stafford have already seen an increase in interest in their local areas from businesses, developers and investors. Forecasts expect local economies to experience a boost of over £3 million per region, making the HS2 a project that will help all of the country grow and develop further.
5. A Strong Economy
Despite initial economic concerns following the decision for Britain to leave the single market, the UK economy has demonstrated stability and resilience in a number of markets.
The British economy displayed an overall sturdy performance in 2016 and grew at the second fastest rate among the G7. Contrary to pre-vote predictions of recession, growth in the six months following the referendum was significantly stronger than experts foresaw.
Certainly, this has not been without struggle, which is portrayed by the volatility of construction, the weakening of the pound and dramatic changes to interests rate. That said, change always provides an opportunity and, in this case, that opportunity falls at the feet of the savvy investor.
The Bank of England cut interest rates following the vote, in attempt to stabilise the economy. As a result, households in a position to buy property are now reaping the rewards of low rates. Those who can afford to pay a big deposit are currently able to borrow exceptionally cheaply.
Additionally, house price increases have remained positive as a whole, construction activity rebounded sharply and mortgage approvals picked up, with consumer spending a driving force of the resistance.
For the overseas investor, it’s the weakness of the pound that creates the most significant opportunity. In the six months following Britain’s decision to leave the EU, the depreciating Sterling triggered a whole new level of investment from Indians living abroad, as well as Turkish and Middle Eastern investors for London’s big budget properties. Enquiries from American buyers immediately shot up by 10%, whilst the sales volumes from the Middle East and Asia grew 10% and remain high.
6. Generation Rent
It’s no secret that a significant chunk of of the population are, whether willingly or grudgingly, living in rented accommodation.
The country’s population is growing at roughly twice the speed of the European average, and is set to do so until 2050.
Whilst many of the 43 million households that are renting do so because they can’t afford a deposit – yet would do anything to get on the property ladder – it’s also becoming a conscious, purposeful decision that people are becoming more and more comfortable with.
Generation Rent undeniably represents a huge opportunity and target market for developers and the buy-to-let investor. As such, developments have naturally started to reflect the needs of the renting population, forming a new asset class popular with tenants and investors alike: build-to-rent.
With gyms, coffee shops, laundry facilities, contemporary design, onsite management and good locations the typical selling points for build-to-rent developments, it’s easy to see why renting is becoming less of a hardship and more of a lifestyle choice.
As for the investor, it’s a chance to start earning during the build period and capitalise on high yields or flip the property upon completion for immediate capital appreciation.