It’s exactly nine years since the effect of the financial crisis sent the UK average house price tumbling to GBP154,452 – the lowest since 2005. Since then prices have steadily increased, a trend which continues according to the latest Office of National Statistics (ONS) data, released this week.
The UK House Price Index (HPI) is a joint production by HM Land Registry, Land and Property Services Northern Ireland, Office for National Statistics, and Registers of Scotland. The UK HPI, introduced in June 2016, includes all residential properties purchased for market value in the UK and is an incredibly valuable source of data when exploring investment opportunities in the UK.
The latest figures from the ONS illustrate why the UK’s property market continues to be attractive for both domestic and international residential property investors. Annual price increases of nearly 5% offer investors a better return on equity than most other asset classes, and an imbalance between supply and demand in the market will continue to support further growth.
As the data indicates, the cities of the Northern Powerhouse remain one of the country’s leading residential investment propositions. This is becoming somewhat of a ‘so what’ topic as these cities go from strength to strength and continue to provide a very attractive proposition for investors. But we believe that it is yet to reach its peak. It’s a topic we have been discussing ever since the Northern Powerhouse initiative was launched and we remain firmly committed to investing in the Northern Powerhouse’s residential market. In 2018 we are expected to invest almost GBP200 million into new developments in the region – nearly twice as much as the GBP106 million, we invested in 2017.
And this is why. Some key locations that we have invested heavily in continue to do well according to the new ONS data.
The North-West, home to cities including Manchester and Liverpool, had an annual uptick of 4.3%. As we discussed in our in-depth look at Manchester’s continual allure to businesses and its persistent growth. It appears that nothing can stop Manchester’s rise to the top.
In addition, Manchester once again topped our latest Global Real Estate Outlook research which identified the city as the jewel in the Northern Powerhouse’s crown, turning investment heads all over the world. Manchester joined the likes of Bangkok, Lisbon, and Berlin at the top of the list. This is a result of an 8.6% increase in house prices and rental yields of 5.6% in the city last year, as well as rapid economic growth and a high graduate retention rate.
Joining the North-West amongst the high performers was Yorkshire and Humber, home to Leeds, outperforming the national average with a 5.1% growth figure. Although arguably less well known as a property investment location, lacking an internationally renowned football team perhaps, we’ve been watching Leeds closely and investing there for a number of years. Back in October last year, we highlighted that Leeds was due to be the Northern Powerhouse’s next hotspot which this week’s data shows was pretty close to the mark. Substantial increases in employment coupled with a lack of available housing mean that there are excellent opportunities for investors in Leeds.
These healthy annual growth figures are matched by the lower property prices in these regions, confirmed by the ONS as GBP156,000 in both regions. This makes investment in these cities a very enticing option for experienced and novice investors alike, whether domestic or international. So despite some areas of England achieving higher growth, the risk-reward tips the balance for many investors, with the entry price point making those regions more unappealing.
The data speaks for itself – the power of the North supercharge an investment portfolio is clear.