Investors Look North

The South has always been the focal point for investors and speculators wanting to make the most out of the growth in the UK property sector but, are the winds of change blowing through the sector?

Here at Open Property Group we have been taking a closer look at the levels of growth around the country and we think you will find the information quite enlightening.

UK House Prices in 2021

House price growth in the UK has continued to astound many in the market. The UK house price index for March 2021 issued by the Office for National Statistics (ONS) shows average house prices increased by 10.2% over the year to March 2021. That represents the largest annual growth rate since the boom of August 2007.

However, what makes these figures interesting, are the areas of the country where the growth rate has been highest, not where we would all have thought, as the below chart reflects. In fact, London continues to be the region of the UK with the lowest annual growth of only 3.7%.

So, what does this mean to the investors out there looking to maximise their growth opportunities?

Well, quite a lot really. Instead of focussing their portfolios on the traditional markets of London and the Home Counties investors are looking further afield to where growth rates are at their strongest.

Cities seeing the highest levels of growth in the first quarter of the year were Birmingham, Swansea, Glasgow, Liverpool and Leicester. All are areas where the house prices are significantly below the UK average, providing opportunities for investors to get in early and see some strong potential gains.

However, the main performers continue to dominate and according to figure recently released by Zoopla, Manchester and Liverpool have been outperforming the other major cities and lead the table with 6.5% and 6.3% annual growth respectively.

What’s more, the growth in the market does not appear to be waning and, as we have commented before in previous posts, there needs to be some stabilisation of the market. When this will happen seems to be becoming less predictable!

Savills recently published its UK housing market predictions and for the next 5 years it has forecast significant growth, with the North West set to lead the way. Forecasts of growth in excess of 25% in the 5 years up to 2025 mean that the opportunity for property portfolios that have a strong Northern bias could easily outperform their Southern counterparts quite considerably.

Traditional Buy-To-Let landlords are already scouring the markets away from the South of England. The opportunity of securing better quality properties with a higher yield and stronger capital growth is a very compelling proposition. Add to this the Government’s pledge to “level up living standards” and the recent local elections, which focussed very much on local issues, means that the often previously less attractive areas are suddenly getting a new lease of life.

We all know that property prices will grow and contract. So you should not always be tempted in by the initial promises of high yield growth but, as the economy starts to bounce back and confidence levels continue to rise, this will feed into localised house price growth.

Nationwide, the UK’s largest mortgage provider, says that it expects UK prices to continue to rise beyond the Stamp Duty Land Tax (SDLT) holiday this year. So it looks like the opportunity for investor growth is going to be with us a little while longer.

For now, those looking for property capital growth and are happy to invest, the market is stronger in the North. However, let us never forget, investments can go down as well as up!