With stock market uncertainty because of Brexit, many UK investors are focusing on real estate as a safe haven from any potential volatility, and as a result the property market in the UK is still steaming ahead. While central London prices have stalled, buy-to-let investors have moved steadily to areas outside of London, chasing yields and strong tenant demand.
Manchester alone has benefited from over 60 000 new jobs since 2011 and major companies such as Ernst & Young, PWC and Deutsche Bank, to name but a few, are contributing.This is according to Craig Illman, a director from UK-based property investment company, Propwealth, who says within the context of the capital city, investment appears laced with potential medium-term risk.
“High prices, high rents and even some new developments being mothballed have caused people to look elsewhere in order to get better value.”
So what's driving the UK buy-to-let investor elsewhere? Illman has the following insights…
- Many investors have been buying in other major UK cities like Liverpool, Birmingham and Manchester. The most interesting trend affecting the property market currently is 'North Shoring', which is the movement of employment from London to the Northwest.
Net migration is strongly positive from London to the Midlands and the Northwest, which is being driven by strong growth in employment. Manchester alone has benefited from over 60 000 new jobs since 2011 and major companies such as Ernst & Young, PWC and Deutsche Bank, to name but a few, are contributing.
A true example of regeneration projects affecting supply and demand of property has been seen in Liverpool where four projects are leading the way in previously run-down areas.The question that emerges then, is: can the Northwest match London for stability and growth? If we look at the changes that have occurred in Liverpool over the past 12 months, there is certainly a case. Job growth year-on-year to June 2016 was 38.1 per cent and the economy grew by 15 per cent. Each of the Northwest cities on average has outperformed London over the past year for capital growth and are providing roughly double the yields.
- Furthermore, property prices are simply much cheaper outside of London. With this in mind the investor is looking for value with capital growth in the medium to long term. From a rental viewpoint, many tenants are finding the high cost of living within London simply too costly. People are prepared to commute and live in more lifestyle-driven regions with fast transport routes. Recent statistics show that some commuters spend some 2-3 hours a day commuting on public transport.
- Upcoming tax changes to UK-based investors with mortgages have caused people to list more property on the market in order to reduce their exposure. Generally, this has been occurring outside London. Sharp-eyed professional investors have, of course, snapped these up as they have recognised opportunities as they arise.
- The value of Sterling dropping since June 2016 has seen an influx of Chinese buyers who, although still keen on the Capital, are snapping up large swathes of properties at auctions anywhere in the UK. They are taking a long-term outlook on their investments and recognise the stability of housing.
From a rental viewpoint, many tenants are finding the high cost of living within London simply too costly. People are prepared to commute and live in more lifestyle-driven regions with fast transport routes.- Technology has also had an impact on people looking to buy or live outside London. The UK government anticipates 95% coverage throughout the country by 2019 with people having access to 90mgb download per second. This upgrade of technology has resulted in many people working from home, or at the least working remotely for a few days a week. Over the coming years all of this will mean that people will migrate to more affordable areas of regeneration.
- Regeneration projects are being unrolled throughout many parts of the North England and this is impacting the property market. The most common factors that drive buy-to-let in the UK are new transport routes opening up, faster transport being delivered, or major upgrades of the areas being approved by councils. Any savvy investor may obtain this type of information from government websites and local council borough updates. On all occasions plans need to be submitted for public scrutiny years in advance and if you time it correctly, one may hit the proverbial investing goldmine. Look to invest within 1/2 mile of a regeneration and only if the area offers strong transport links.
A true example of regeneration projects affecting supply and demand of property has been seen in Liverpool where four projects are leading the way in previously run-down areas. Investors who have acquired in these areas have done well. The £26 million regeneration of the Anfield football stadium has seen property prices increase by 12% in one year.
Furthermore, the new extension to the Liverpool hospital has resulted in strong tenant demand from nurses and students, the recently announced £1 billion upgrade of Bootle will see new parks, schools, shopping centres and hotels affecting property prices and bringing in more and more tenants.
- Lastly, the recently announced Wirral upgrade will have the same effect. The property developer, Peel, says it wants to create a Marine, Energy and Automotive (MEA) Park, at West Float, inland from the Mersey on the Wirral docks. It is also planning a £150m cluster of buildings at Four Bridges, including a Maritime Knowledge Hub in the Victorian hydraulic tower and a pop-up style centre for digital and creative firms. While the sister Liverpool Waters scheme across the Mersey has made some visible progress over the past year, with new plans for towers revealed, Wirral council recently unveiled a £1bn vision for investments in Wirral. Much of which will be focused on Birkenhead and the Woodside waterfront.
“A true example of the correct investment outside London is in Liverpool - RICE HOUSE - a new development in a Victorian era building being sold by Propwealth,” says Illman. “It is in the heart of the Wirral Upgrade area, with prices from £46 000 to £59 000.
The flats are in a bespoke property of 4 units and have existing tenants, and he says investors can expect net yields of 6-7% after expenses.
Propwealth is a UK-based property investment business headed up by South Africans and has been investing in the Northwest of England for the last 6 years, particularly Liverpool. Craig and Anthony, directors of Propwealth, will be holding meetings in Cape Town and Johannesburg on 7, 11 and 12 April. To book an appointment, send an email or book via the website.
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