Will Leyland, 05 December 2017
Research has been released which shows some of the UK’s fastest growing property and economic hot spots. There are few surprises on the list, with the likes of Manchester and London ranking highly, but economic growth in other areas has provided interesting insight into the progress of the country in property and business.
Following on from last week’s budget reports, meaning that earnings will be no better off than they were in 2008, it seems that wages, inflation and growth are once again under the spotlight. With Brexit economics now playing out and seeing inflation rise, the pressure is on to grow the nation’s wage packets in line with inflation.
Certainly one of the key areas of The Chancellor’s make or break budget was housing, in which he promised to abolish stamp duty for first time buyers and build hundreds of thousands of homes to alleviate the affordability issue for many trying entering the housing market.
The task for him may be starker than he cares to believe, according to Hometrack who released a report recently showing that property prices in London are now 14.5 times the earnings of an average Londoner, the highest level on record.
It is a matter of debate as to whether prices are sustainably rising or whether they are rising slowly but quicker than almost stagnant wages.
According to The Telegraph, who published the report, London was followed by Cambridge, where the average property is 14.3 times earnings, Oxford (12.6) and Bournemouth (10.1). In most cities outside the South East, this ratio has stayed largely unchanged in the last 15 years, and in Glasgow, Liverpool and Newcastle it is lower than the long-term average.
Perhaps unsurprisingly, Manchester and Birmingham registered the biggest growth in property prices over the year, with increases of 7.9% and 7.4% respectively. The regions have had an extremely strong three years for property and investment, with the Northern Powerhouse project proving to be a key factor.
Yields and rental growth have also remained strong in the areas too, with Liverpool, Leeds and Sheffield also benefiting from the same positive factors.
The key difference between the likes of Manchester and Sheffield and cities like London in the South East is that affordability to earnings ratios have remained largely unchanged over the last decade or so.
Commenting in The Telegraph, Richard Donnell, head of research at Hometrack, said: “In regional cities outside of the South East, house price growth remains robust as affordability is still attractive and unemployment continues to fall. This can be seen in cities such as Manchester and Birmingham where the current house price-to-earnings ratio is only slightly higher than it has been on average over the last 15 years.”
The message, it seems, is that whilst property price growth in the capital for landlords remains strong, there is a real issue coming down the line as affordability reaches unsustainable levels. In comparison to the situation from the Midlands and upwards, this is a trend that cannot reasonably continue.
This should prove a contributing factor to continue buy-to-let (BTL) growth in these areas with the cities already proving extremely popular with BTL landlords and tenants. For those looking to increase their portfolios these areas present a significantly better long term prospect that more southern regions.
That’s not to say that areas across the capital and the south east don’t represent value any more, but that much more research and instinct would be required in order to sniff it out. That initial workload could be considered vastly less in areas such as Manchester.
Will Leyland, 05 December 2017