What investors should know about investing in property in the north
Even though property values in London and the south east have softened of late they’re still at record highs, meaning more and more property investors are looking towards areas with lower property prices.
One area where prices are consistently lower is the north of England. In this article you’ll find Insider’s tips on investing up north.
1. It’s not frozen, it’s not grim, it’s not even that industrial any more – nor any of the other stereotypes you might hear about the north. There’s even gas and electricity too! In short, investing in property here is not really that different to investing in any other part of the country.
2. It’s by and large a lot cheaper. You can invest in property for around a quarter of the price of London – or to look at it another way buy four properties here instead of one in the south east. For example, if you are looking to buy one property in London for £500,000 you could instead buy four in the north east or north west for £125,000 each.
And here is why that is important:
3. By and large yields are higher too, and can be much higher in some cases. It’s simple economics. Property prices are lower but rents are not lower in the same proportion as in the south east.
4. It’s a big area …. so there’s a lot of variation. There are some property hotspots in the north where property prices will make your eyes water, just like London. Try parts of Cheshire, for example, or the north Leeds/North Yorkshire border.
5. More people who live in the north aspire to, and are able to, buy their own home here because it’s still relatively affordable compared to the south. So, although there’s been a strong letting market over the last few years, it shouldn’t be assumed this will always be the case.
6. Cheaper than cheap areas – buy with your eyes open. Yes, there are some parts of the north where you can buy a house for the price of an average executive car and yields are huge – but there’s always a reason for that. Often, the economy in those locations is stuffed and that’s why prices and resale potential are weak.
You can still make money in these areas (and actually they’re only a small part of the north) but you need to know what you’re doing if investing in these places.
7. When it comes to cities, the north is often very different. Unlike in London where prices are higher in the centre and decline as you travel out, in the north prices tend to be lower in the centre and rise as you travel out. (Those northerners can be odd like that!)
Not many northern towns and cities have much of a city living scene – except Manchester and perhaps Leeds.
8. The exact same things that make a property attractive to buyers/tenants are the things that make it attractive in the south: Proximity to work, proximity to transport and local amenities, and proximity to good schools are things to look at when investing.
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9. The transport issue is something to particularly focus on. Because its generally not as good as in the south some northern locations that are well connected have higher property prices, while nearby places that are not so well connected are cheaper. You need to know your areas.
10. Price appreciation is generally much harder to predict in the north than in the south. Prices in the north tend to rise slowly in the good times, and drop off quickly in the bad. In London, for example, prices started rising in 2009, almost immediately after the financial crisis. In many parts of the north prices are still below their 2007-2008 peak. It might happen, but you shouldn’t assume London price rises will ripple out to the north as some commentators suggest.
At the end of the day, it’s unlikely northern property prices will ever behave like London and south east prices if for no other reason than there’s more space, more supply and less demand – the basic fundamentals behind every property market – up north.
Insider advice. If you decide to invest in the north do your own research and take expert advice. Never assume that just because property seems a bargain compared to the south it actually is. Decide what your investment aims are. Decide what you’re going to do with your investment. Decide what sort of market you want to be involved in.
With a little care, however, there’s no reason a property investment in the north can’t offer a much better return on capital than investing in the south.