London Vs The Northern Powerhouse
London Vs The Northern Powerhouse – Where are the best Returns?
The divide between the North and South is something that’s been recognised throughout history. There are distinct cultural, economic and social differences between the two regions that contribute to every element of life. For instance, down South, incomes are generally higher, unemployment is lower, and even the average life expectancy is significantly higher than for people up North.
The one element that the North holds in its favour, however, is the housing market, with a number of London investors shifting their focus up North for better returns; a clearer roadmap ahead to success and steady growth (as opposed to uncertainty in the south). Let’s take a look at the state of the housing market within the cities of the Northern Powerhouse compared to London, and work out which area has the best returns when it comes to UK property investment. Keep reading to find out more.
London vs Manchester & Liverpool
The North and South Divide
Northern Powerhouse cities such as Liverpool, Manchester, and Leeds, are quickly gaining momentum as property investment hotspots and the best places to buy to let in the UK.
With sky-high rental returns and strong affordability, the North has been considered the best place to buy property for many years.
The North has come a long way since decades ago, back when Northern cities and towns faced great economic difficulty whilst the more affluent South thrived in comparison. The economic power of London has been noted ever since the 19th century, and by the 1980’s, this divide between the North and South had become one of the country’s biggest political issues.
The housing market is one area that was affected by Thatcherism in the 1980’s. In the 1970’s, the average house price across the UK stood at around £4975, but by the 1980’s, prices rose drastically. During this era, houses reached record highs of £39,500, almost doubling by 1990 at £60,000. The number of new housing developments being built during the 1980’s was low, with more of a focus on regenerating existing buildings and converting run-down areas like Liverpool’s docks.
In the North, housing has always been significantly lower in price than in the South. Whilst the average property price in 1995 stood at £90,000 in London, the affluent L19 postcode of Liverpool was more than half this at just £43,000 in the same year. That’s not to say, however, that Liverpool hasn’t always had the potential for return on investment, with properties in the same area reaching highs of £278,495 by 2015. Additionally, the benefit of this more accessible price range is that it will help investors more easily get their hands on an investment property with the potential for faster growth, as opposed to paying large sums in the capital for a property that is at a bit of a standstill with regards to its price.
London Property Investment
Over recent years, London has lost its appeal as a city to invest in, particularly for those seeking the best places to buy to let. With an average property price of £671,989 in April 2020, which is rising each year, decreasing rental prices, and some of the lowest rental yields in the country, it’s no surprise that people are starting to look elsewhere for their ventures. Rental yields in London average at around 3.7%, which leaves hardly any potential for returns when paired with the high London prices. The more affordable boroughs of London are seeing the highest demand for property, suggesting that fewer people in the city are prepared to pay the high rental costs needed for a decent return on investment. With overall demand for London property having dropped to just 27% in 2018, and the stagnating effect of Brexit still having effects on the market today, prospects aren’t looking good for investors in the capital.
It isn’t all doom and gloom on London’s property front, however, with a number of the city’s neighbourhoods predicted to offer some promising future investments. Croydon, Earls Court, Canary Wharf and more areas are estimated to grow throughout 2020 and beyond, with increased rental yields in London that mimic those of other cities in England. Additionally, despite still costing a large sum, some international investors and those who want to secure luxury and prime London real estate can in some circumstances take advantage of stagnating market and get a property at a bit of a better price. There is no denying the overall value (not just monetary) of a grand London property, and so those that have their hearts set on being in the capital might be able to secure themselves a better deal than usual. Buy Association reported this year that international investors have seized the chance to look into areas such as London, Sydney and Lisbon this year. Although, they too acknowledge the likes of Liverpool and Manchester as extremely viable alternatives.
But what about those who don’t want to wait for the highest rental yields in the UK?
Investing in The Northern Powerhouse
Investment into the Northern Powerhouse has never been stronger. The key cities of the Northern Powerhouse, Manchester and Liverpool, all offer some great rental yields and potential for those keen to invest in some of the best buy to let areas. Whilst Northern cities have for a long time been deemed less favourable when compared to Southern cities like London, in actuality, Liverpool and Manchester are now some of the most dynamic and prosperous cities in the country. Investors and property buyers that think carefully and diversify their portfolios in cities like these can stand to make returns a lot faster than in the stagnating capital, that in many ways is still feeling the effects of the Brexit fallout.
Liverpool and Manchester have everything an investor or tenant needs in a city. From beautiful architecture, a rich culture, renowned universities, exciting business opportunities, and brilliant attractions and local amenities, the North has come a long way since the days of economic turmoil. The Northern Powerhouse is an initiative that’s aiming to improve the cities of the North even further by investing in transport and connectivity, skills and education, economic growth, and overall quality of life for those living and working up North. For investors that are buying property in these areas at the moment, these ongoing regeneration plans are nothing but good news.
The exciting plans in place for Northern cities like Liverpool and Manchester are part of what makes them some of the best buy to let areas in the UK, with an optimistic outlook for capital-growth. Liverpool and Manchester offer some of the highest rental yields the UK has seen as of late, with an average of 5% in Liverpool and 5.5% in Manchester. The price it costs to purchase a property up North plays a big part in this outcome, with property in Liverpool, for example, costing £182,517 on average. To put that into perspective, that’s around £489,472 cheaper than the London alternative.
Not only this, but rental prices in key Northern cities are rising, with a 2.65% growth in Liverpool and 5.76% increase in Manchester. This increase has likely been driven by the number of people moving up North from London in recent years, with Manchester having seen a total of 10,200 Londoners move there in 2017, compared to 8,870 people leaving the city to head to London. With a number of exciting business opportunities available in Manchester, a lower cost of living, and better value for money regarding rental properties, it’s not hard to see why people are being drawn to the North. With it’s growing digital sector in the Baltic Triangle, quickly becoming a go-to destination for young entrepreneurs and tech startups across the country, Liverpool is also attracting a lot of workers away from the expensive south.
The North Vs. South – A popularity contest
A large component of what makes these UK cities special is their identities, their sights and sounds, and what they can offer from a tourist’s perspective. It might sound trivial, but a city’s tenant demand comes from the sorts of experiences it can provide, and tenant demand is an enormous factor in maintaining a consistent rental yield income stream on an investment property. After all, you could have a luxurious apartment in one of the best areas in the country statistically, but if you can’t secure a tenant then you wont start recouping any of the costs through rent, and it’s important that you have a continual income stream through rent if you are to bolster your investment portfolio.
One of the biggest benefits that London has going for it, and something that the North is going to continue to have to overcome, is that it is far in the lead in terms of being the tourism capital of the country, and the destination that everyone wants to visit when travelling to the country (or even Europe, for that matter). The amount of money and attention that this brings in is part of what drives up the home prices in the area, but unfortunately rental yield growth is not on the rise on average, and sits a lot lower than, say, Liverpool, for example, as those living there simply cannot afford the prices.
Again, a by-product of the Northern Powerhouse initiative, cities such as Liverpool and Manchester are growing with regeneration projects that will attract more tourists and thus generate more money for the respective cities, benefitting investors. Additionally, as regeneration and development continues in the Northern Powerhouse cities, they will increasingly surge in demand, with the surrounding build up of features and facilities driving up capital growth and also rental yield percentages. One prime example of a development in Liverpool is the ongoing waterfront cruise liner terminal development throughout 2020, which will increase jobs, the potential for more tourists to arrive, and therefore the potential for surrounding properties to benefit from the growth.
Currently, according to Totally Money’s buy to let rental yield map, Liverpool’s L1 city centre postcode is the only area in the country to reach an average of over 10%. This is just an example of what potentially may come over the coming months and years for those that plant themselves in the city.
Overall, it’s clear that for investors who want to make an attractive and safe return on investment without having to wait, looking throughout the Northern Powerhouse is the best route to take. At RWinvest, we offer some of the best rental yields in the UK in some of the best places to buy to let. Get in touch with us today to chat with a knowledgeable member of our team and find the perfect investment opportunity for you.