GrowthMay 9 2017

North tipped as next property hotspot

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North tipped as next property hotspot

The north of England could be the next property hotspot as buyers and investors take advantage of lower house prices and higher rental yields.

Brokers in the north are reporting a surge in interest from buy-to-let (BTL) investors moving out of the London market after being hit by higher stamp duty rates and the reduction in higher rate tax relief.

And with the region’s economy picking up, and more infrastructure investment promised as part of the government’s Northern Powerhouse scheme, more and more people are viewing it as an attractive place to live.

Manchester was named the city with the fastest-rising house prices in the February 2017 Hometrack UK Cities House Price index, knocking Bristol into second place, while Equifax Touchstone revealed the North and Yorkshire saw the highest growth in mortgage sales during the same month.

Buy-to-let yields in the North were also the highest in the country during the second half of 2016 – 7 per cent, compared to just 4.4 per cent in London, according to data from BM Solutions.

Ian Ward, director of Wirral-based The Mortgage Partnership, told FTAdviser: “BTL landlords, faced with loss of tax relief and added costs, are having to look further afield to find properties on which they can preserve the kind of yields they have been used to elsewhere. 

“For the more mobile, keen to get on the housing ladder, the North is going to be potentially attractive for first-time buyers to up sticks and move north.”

Commenting on the Equifax figures, Ian Dawson, managing director at North Yorkshire-based Yorkshire Life Financial Services, said: “For the price of a £500,000 property in London you could probably buy five decent properties in a lot of northern towns.

“A lot of people are probably coming to London and the south east and thinking they are not getting much for their money and maybe shifting up north.”

Paul Dorward, mortgage broker at Sheffield-based PAD Financial, said he had seen a lot of people looking to buy in Manchester rather than London, adding that people were starting to realise “it’s not so grim up north”.

He told FTAdvsier: “London is quite insular. People who live there get caught up in a bubble and forget there are other parts of the country.

“Other parts of the country have regenerated. I live in Sheffield, and people still think of it as where the Full Monty was made. It could not be further from the truth.

“We have got big, multinational tech companies setting up in this area. They might still have a focus on London to help with their image, but they employ people all over the country.”

Analysis carried out by Landbay revealed areas that will be served by the HS2 high-speed rail link, including Birmingham, Leeds, Sheffield and Manchester, have seen faster-than-average growth in rents.

Mr Ward added: “To become a real hotspot, clearly the infrastructure needs to be in place with businesses able to offer opportunities for those moving to take advantage of the lower house prices in the north. 

“We could see an influx of talent, provided there are the openings for them to make the change. I think we are likely see a lot of incomers in the next few years.”

But as Mr Dorward explained, buying a property in the North could come with higher risks attached, as the area is arguably more vulnerable than London to the effects of an economic downturn.

“I was working in the industry during the credit crunch, and properties in London, although they did suffer, bounced back and went way beyond where they were before,” he said. “There are other areas where they are just getting back to where they were. 

“When you are looking at investment properties, it is about knowing where you are buying. There are places where it is cheap for a reason. 

“If you just look at the price tag of something without knowing the demographics of the area, you might find you are not getting the right returns. You have got to know your area – you can’t just look at buying something where it is cheaper.”

simon.allin@ft.com