The North vs The South - Where Should I Invest?
If you hadn’t noticed, there is constant debate about the benefits of yield vs long term capital appreciation in the North vs South of England.
Now we are Northern Property Partners so some may say we are biased but let’s test it before we hail everything should be Northern!
There are definite positives and negatives for each side so let’s take a closer look to see which offers more opportunity for the investor.
For property investors, strong capital growth will be one of the keys considerations when choosing what property to invest in, along with a strong rental yield. These days, the strength of the Northern property market means that both are very much available ‘up north’.
Historically the North has been popular for investors seeking ‘yield’ and cash flow but has been playing second fiddle to the south from a capital appreciation perspective. The Northern powerhouse has been growing over the last decade and this was only accelerated by Covid 19 and the more flexible working environment that’s created for many. This, plus the move out of London for many big businesses, has seen further growth in CBDs in Leeds and Manchester specifically.
Savills has the housing market in Humberside and Yorkshire as a 28% increase in the last five years, giving property investors strong capital appreciation as well as the higher cash flow return on their investments.
It’s hard to ignore lower house which makes it much easier to get a foot on the ladder and / or diversify your risk with multiple properties. Savings in stamp duty – that barrier to investment is massively lower in the north with the lower house prices. For instance, if one was to buy three £150,000 rental properties up north the stamp duty applicable to a uk investor would be a total of £15,000.
If that same investor was to purchase down south, it’s likely that £450,000 would be purchasing one investment property and thus the stamp duty applicable would be £26,000.
Whilst the North has always being king of yield, there doesn’t seem to be a slowing down of rent increases. Private rental sector rent continues to grow with house prices.
It sounds promising for the North but what about down South?
London has seen rents increase by up to 30% over the past few months. This increase has been so huge that they are thinking of putting a price cap to stop this continuing! The affordability in the capital is a problem for most so rents need to stay manageable for the average worker.
House prices down South are extremely high with an average price of £530,000 versus Leeds at £260,000 (less than half price).
London used to trump the north just on the appreciation of property prices long term, however as we’ve suggested already, that is just not the case anymore. Lots of different data is available and London is very post code specific, but to generalise, Manchester, Leeds and Sheffield are now outperforming most boroughs in London. London will no doubt recover but the northern powerhouse is set for continued sustainable growth.
Realistically, in the South you are more likely to be around 2-3% yield versus the Northern area seeing upwards of 6% yields.
Whether it be the north or the south, investing savings and profits into an asset base is a must in the current economy of high inflation and whilst the bank of England’s MO is to contain inflation at 2%, we fear we’re way off that yet and the UK has a good few years of high inflation to deal with.
North or South – over the long term, property is a relatively risk-free investment compared to the many other opportunities out there.
As we always like to point out at the NPP Group, property is the only tangible, insurable and leverageable asset class outside of business and historically it’s where a high percentage of the smart money is invested.
Confession time. we can’t help you in the south, but we can help you build a property portfolio of any kind up in the North, so please get in touch and let’s see how we can help you invest in the northern powerhouse.
