While home prices in London and the South East are slowing towards a standstill, large regional cities in other parts of the country, particularly in the north of England, continue to register robust levels of price inflation, supported by low mortgage rates, falling unemployment and of course, cheaper property prices.
Cooler market conditions in the capital contributed to a slowdown in the latest headline rate of growth for Hometrack’s UK Cities Index, which is now running at 6.4%, down from 6.9% a month earlier and 7.8% a year ago.
The 20-city average now stands at £246,100, with Manchester registering the greatest uplift in the country, with an increase of 8.8% in the last year.
Ged McPartlin, sales director at Ascend Properties, said: “For years we have stressed that the Manchester property market was going to enjoy hugely positive growth, owing to affordability, widespread investment across the city, excellent transport links and employment prospects - with swathes of young professionals now choosing to make it home.
“Now we are consistently seeing the figures to back it up, with the latest Hometrack report showing that Manchester is leading the charge outside of London and the south.”
Capital growth in London has now been surpassed by a number of cities, including Liverpool, where similarly prices are rising off a lower base and affordability levels remain attractive.
Given that home prices in London are 85% higher than they were in 2009, prices in the capital have long been overdue a cooling off, according to Graham Davidson, managing director of Sequre Property Investment.
He commented: “From an investment point of view, as the Hometrack report shows, the rise of the northern regions is now a primary focus - with lower entry prices and yields that are simply not available in the capital anymore.
“Our own business has seen numerous investors taking their money out of London and we expect this to be a growing trend in 2017.”
Richard Donnell, insight director at Hometrack, believes that there is material upside for residential property prices in the coming years in many cities where the recovery since 2009 has been limited.
He said: “Typically those where investment in employment, infrastructure and regeneration will help stimulate the local economy.”
Supported by a new BBC Media City, a major extension to the MetroLink tram system, expansion of the local airport, a new trendy Northern Quarter, not to mention the fact that it is at the centre of plans to create a Northern Powerhouse, Manchester, which recovered from the Great Recession of 2007-09 a lot quicker than the other cities in the north, has an awful lot going for it.
The average price of a home in Manchester currently stands at around £152,000, but like most places, there are regional variations across Manchester, with the most expensive homes found in the city centre, while capital growth in Greater Manchester of late has been led by Trafford and Stockport, supported by a robust local economy.
Manchester is home to around 100,000 students, thousands of young professionals, with more 25-29 year olds living in the region than anywhere else in the UK; an attractive proposition for property investors, including buy-to-let landlords.
Property peer-to-peer lender Kuflink recently examined the average rental yield in 50 major towns and cities across the UK and found that properties in Manchester lead the way, providing an average rental return of 6.7%.
Tarlochan Garcha, CEO at Kuflink, pointed out that as a “bustling” city, Manchester is not just “popular with young professionals”, but also families, helping to “offer solid returns for landlords”.
With demand from tenants outstripping supply, various experts forecast that rents in the city are likely to rise further this year, while house prices remain affordable, suggesting that they offer room for growth, as reflected by recent increases.
With so much happening in the city, including a huge amount of redevelopment, Manchester was unsurprisingly named in a survey as one of the best places to invest in UK property right now, which may explain why former professional football players Ryan Giggs and Gary Neville are now looking to get in on the act.
The former Manchester United stars have just unveiled plans to redevelop a key part of Manchester city centre, which would include two skyscrapers, a five-star hotel, flats and restaurants.
The 700,000 sq ft St Michael’s scheme envisages building a 31-storey bronze skyscraper and a 21-storey neighbour.
The final submitted plans comprise a 201-bed five-star hotel, 159 flats, 138,000 sq ft of grade A office space and 49,000 sq ft of retail and leisure space, including two new sky bars and restaurants, as well as three public spaces.
Neville believes that the planned mixed-use scheme would be “one of the biggest statements in architecture in modern times in Manchester”.
Long stuck in the shadow of neighbouring Manchester, the housing market recovery took a lot longer to reach Liverpool. However, the city has seen robust growth in property prices of 6.8% over the past 12 months, according to Hometrack.
“There is a lack of properties coming on to the market which must, eventually, lead to price inflation,” said Derek Coates from Liverpool-based Venmores, who told the press that it has been a strong start to the year “with regard to sales enquiries and actual sales agreed”.
But at just £115,600, the average price of a home in Liverpool remains significantly below the average in the UK – and still some way off the peak achieved in 2007 at the height of the last property boom.
But that could be about to change as the transformation in the city, which started over a decade ago in the run-up to Liverpool being crowned the European Capital of Culture 2008, continues to take shape.
Regeneration remains a key strategy that is rejuvenating the city’s fortunes, having transformed it from a place in decline to an economically vibrant place to live, work, study, shop, and party, not to mention the fact that it is now a thriving tourist destination.
From the £200m transformation of the city’s business district, which will be undertaken by Kier Construction and CTP Limited, to the £260m regeneration of Anfield on the outskirts, helping to make it a far more affluent place to live, there is a lot going on in the city.
“Liverpool is becoming a city for property investors with more building applications being filed every month,” said Mish Liyanage, managing director of The Mistoria Group.
But it is the £5bn Liverpool Waters scheme in the Central Docks area, which will see 150 acres transformed, as part of the biggest regeneration project in the history of Liverpool, which is attracting the greatest attention from investors and developers, with several groups having already visited the city to see the opportunities on offer first hand.
Lindsey Ashworth, director of development of Liverpool Waters, said: “Liverpool Waters is a unique opportunity to invest in a world-famous waterfront and it’s no surprise that this latest phase of the project has already generated interest from investors and developers.”
Aside from offering good prospects for capital growth, the rental yields on offer in Liverpool are among the best in the country.
Recent research by Aspen Woolf identified the UK’s latest buy-to-let ‘hotspots’ and they included Manchester, Cardiff, Leeds and Liverpool.
But there is another city in the North West of England which is rapidly emerging as a new buy-to-let hotspot, according to a local housing expert.
Having been stuck in the doldrums for well over 20 years, 2016 marked a huge turning point for the North West’s third city, Preston, according to Matt Eastham, a director at Easthams & Co, where property prices start from around £25,000.
Large-scale investment and regeneration programmes, such as the £440m City Deal, which along with other investments, is expected to create upwards of 20,000 new jobs, boosting the local economy to the tune of £1bn over the next decade.
The University of Central Lancashire, a public university based in Preston, which currently boasts a staff and student community approaching 38,000, recently announced plans to invest a further £200m into its City campus increasing numbers to over 50,000, making it the fourth largest university in England.
Strategically located, Preston is the geographic centre of the UK offering easy access to the M6, M61, M65 and the M55 motorway networks and is also less than an hour’s drive from Manchester, Liverpool or the Lake District and just two hours by train from London and Glasgow.
Over 40% of the UK’s working population live within a one hour commute making it an ideal location for companies, such as BAE Systems, while the city was named in 2016 by the Guardian as the number one place to live for quality of life in the north of England.
According to Eastham, there are several major projects in the pipeline, providing a welcome boost for the area.
He explained: “Around £50m is being invested into the Markets Quarter to develop an 11-screen cinema complex with seven restaurant units and a new multi-storey car park of 593 spaces.
“The listed bus station is undergoing a complete £25m refurbishment with the creation of a youth zone and public square, the Guild Hall is being brought back to its former glory with a £15m makeover and will again begin to host world snooker and darts events as well as major music acts.
“The city has already seen the refurbishment of the stunning Winckley Square, one of the finest Georgian squares in the UK, with plans already passed to convert several unoccupied former office buildings on the square into high-end residential apartments, as part of the council’s new City Living strategy.”
Preston now offers a true alternative for savvy investors who have historically invested in Manchester and Liverpool.
“The smart money is currently being invested in the city centre where major new build residential developments are planned and areas, such as those around Winckley Square, where large Victorian and Georgian properties close to the stunning Avenham Park and Miller Gardens can be acquired for as little as a two-bedroom apartment in Manchester,” Eastham added.
According to the latest statistics from Resi Analytics, semi-detached houses in the PR1 and PR2 postcodes have increased in value by 16.7% to an average of £146,389 since mid-2015, while apartments (£87,955) and detached houses (£238,475) are up 8.2% and 5.4% respectively over the same period. But the average price of a terraced home in the area has actually dropped by 1.7% over the last 18 months to an average of £109,122.
Eastham reports that gross rental yields typically vary from 6-8%, but insists that the “potential for capital growth” in the local housing market remains the “the biggest factor” at the moment.
Easthams & Co
Sequre Property Investment
The Mistoria Group
*Marc Da Silva is Estate Agent Today and Letting Agent Today Features Editor. You can follow him on Twitter @propertyjourno