Affordable property in Manchester is attracting new buyersAdobe Stock
The residential property market in northern England has garnered a great deal of media attention over the last few months as it continues to go from strength to strength, with property transactions and house prices rising across several regions.
Southern cities used to dominate house price growth reports, but over the past five years, more than half of northern cities have made the UK top 10.
Zoopla research revealed that houses prices grew the fastest in cities in the Midlands, the North of England, Wales and Scotland. Values have surged by 15% in Manchester and Leicester, and 16% in Birmingham. Meanwhile, growth in the South has slowed to just 1% in London and 2% in Oxford.
The millennial and homeowner exodus
Don’t get me wrong – I love London. The unique history, the museums and galleries, the public transport links, the parks and the incredible bars and restaurants add up to something special. But there’s no doubt that it’s also an expensive city.
The average house price in London is more than double that of the rest of the U.K., coming in at £479,000 compared to the national average of £223,000. House prices here outstrip average earnings by 13 times, compared to seven times in England and Wales as a whole. And with the average rent for a two-bedroom private rented house in London at £1,730 compared with £820 across England, rents often consume large portions of wages.
For many, the capital has simply become unaffordable. The number of millennials leaving the city is at its highest level for more than a decade. Even homeowners are leaving for greener pastures.
While it’s hard to say how much is “pull” versus “push”, a common theme cited among leavers is the significantly cheaper housing. Young Londoners simply don’t have the space to start a family. For homeowners, there’s a widespread desire to “trade up the housing ladder”, cashing in on the London property bonus and buying something bigger outside of the capital.
Years ago, when Londoners relocated, they tended to move to commuter towns – but more and more, that’s not the case. One in 17 headed to the Midlands or the North back in 2008. In 2018, it was one in five.
While ex-Londoners are moving further and away from the capital, this hasn’t necessarily meant leaving London work behind. Faster broadband and a rise in flexible working conditions have allowed many to keep their London jobs and work from home.
For others committed to commuting, the prospect of HS2, a high-speed railway which will connect London, Birmingham, the East Midlands, Leeds and Manchester – cutting the journey time between Birmingham and London down to just 45 minutes – has proved enticing. Set to open between 2026 and 2033, its impact is already being noted in rising prices.
Foreign investment
It’s not just the changing needs of the domestic market that are boosting prices up North; the evolving desires of foreign buyers are also contributing to price surges.
Stimulated by low-interest rates and favourable exchange rates, foreign investors have been in a position to snap up U.K. property at discount prices. Chinese buyers, in particular, are seizing the opportunity.
In 2003, 16 yuan was equivalent to one pound. Now, it’s just eight yuan to the pound. In combination with rising GDP per capita, Chinese nationals are increasingly in a position to splash out on commercial and residential property.
It’s Northern cities with more affordable offerings, like Manchester, that are frequently catching their eye. Part of the city’s appeal is the university, which is already one of the largest recruiters of international students in the U.K. In fact, of the 20 universities attracting the most foreign students, only six are in London.
Named one of the top global cities for foreign direct investment, prices surged in Manchester more than anywhere else in the U.K. last year – increasing 6.6% – and enquiries by Chinese investors about buy-to-let in the city soared in January 2018 by 255.6% compared to the previous year.
Opportunity to capitalize
For estate agents looking to capitalize on this trend, aligning sales and marketing with diverse customer segments and needs will be key. The Midlands, the North and Scotland have attracted buyers with varied motivations: from young professionals and new families to foreign investors.
For millennials (the largest segment of homebuyers) spacious properties, as well as access to London through public transport, will be key. Starter homes that provide entry into the real estate market and allow young buyers to work their way up the property ladder will be a great demand.
For foreign investors, bearing in mind more than 70% of the homes bought in the U.K. by foreigners are rental investments, buy-to-let yields and the growth potential of Northern properties will prove appealing. Appealing to the inner investor will be a winning strategy.
Others with sons and daughters studying in the U.K. may also be looking at student-style accommodation. These might be one-bedroom or two-bedroom properties within easy reach of the university central campus, lecture hall or library.
Final thoughts
This doesn’t mean London is off the cards in any way; a significant portion of sales handled in the capital by international estate agents are overseas buyers, especially in central areas. It does, however, ring in a new era, where we may expect to see a wider geographical spread of the national demand for housing.
It’s undoubtedly an exciting and potentially growth-rich time for those agencies that are not only able to meet these changing demand patterns on surface level, but for those who are pre-empting the changing needs of buyers, and adapting at their core to be nimble enough to meet buyers where they are at.