Calling all property investors – it’s time to look up North

Frazer Fearnhead, CEO of The House Crowd

Source: ©Photoshot

Take a look

The North-South divide in the UK is the subject of much cultural and social discourse. Historically, the North has prevailed with offers of a balanced and overall more affordable lifestyle, by comparison to the hustle and bustle (and generally more expensive) ways of London life.

However, that might be due to change. House prices in the South, particularly London, are in decline – while areas in the North and North West are becoming more desirable. This is according to the latest Hometrack figures, which saw house prices falling in real terms in London while Manchester, Leicester and Liverpool all grew by more than six percent per annum.

House prices are up in the UK overall in Q1 2018,  but experts are predicting muted growth for London over the next few years. That’s not to say that people are necessarily turning their backs on London, but rather other cities are becoming increasingly attractive as industry looks outside of the capital.

The trend of companies moving out of London is particularly evident within the technology sector - Manchester is very popular, and industry in the North West is booming with new tech firms. The Silicon Canal is working hard to create a tech ecosystem in Birmingham and MediaCityUK is attracting a lot of talent, too.

These initiatives actively affect the property market - they attract buyers looking to live somewhere affordable and commutable. Altrincham was recently named the best place to live in the region and forty percent of the houses in our latest development in Cheshire sold on the opening day. In fact, a lot of our properties are being sold off before they’re even completed. Prices in the region continue to increase by four to five percent per year, and we’ve exceeded estimated sales prices on all our developments so far.

What does this mean for property investors?

London will always be an important place for property investment – no one is denying that. But there’s a lot of value in the North West of England. If companies are willing to invest their money and resources outside of London, it makes sense for landlords to do so to. 

However, in addition to investment location, it’s important to consider investment method.  Buy-to-let investment has dropped 80% in three years, largely due to the tapered removal of tax relief on mortgage interest, three percent stamp duty surcharge and tougher mortgage rules. This doesn’t necessarily mean that buy-to-let is completely dead – some strategies may still work, but it does mean that would-be landlords should consider their other property investment options, including alternative products like peer to peer property loans, development finance and lending via an Innovative Finance ISAs secured against property.

Many of these offer very attractive returns of seven percent plus per annum and come without 3am phone calls to deal with a leaking toilet!

Social good

One of the most exciting areas of alternative property investment is crowdfunding specifically designed to fund much needed new housing developments. It’s a socially responsible form of investment as many of the developments are part of the government’s Help to Buy Scheme. Money invested plays a part in addressing Britain’s ongoing housing crisis, while enabling investors to earn consistent returns of around ten percent per annum with a strong risk-reward ratio.

London property prices will inevitably bounce back; the data on house prices falling is already six months old and some of the agents we deal with report prices are actually picking up. Ultimately, things are cyclical – Brexit has created uncertainty and that’s causing fluctuations. But for now, savvy property investors are looking to the North West for the best returns. As house prices outperform the South, infrastructure improves, and new working opportunities become available, it’s hard to blame new families and working people for wanting to move out of the capital. If you’re looking to invest in property, it just might be the right time to join them.

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