Where should property investors put their money?

Given London's lack of affordability and low yields, property investors are caught in a conundrum - should they invest in the North or South of the UK? This question gains significance as the dynamics of the UK housing market keep evolving.The once-unchallenged charm of London is showing signs of waning, with an increasing number of property seekers drawn to the growing allure of northern cities.

Interestingly, the escalating demand for rentals in the North is gradually bridging the North-South divide, bringing cities on both ends of the spectrum closer in terms of housing appeal. At first glance, one might assume that investing in London, with its world-class status and premium prices, would yield the highest returns. After all, average house prices in London easily surpass those of any other UK city. However, reality begs to paint a different picture.

Drivers for investing in property in cities outside London

The global shift towards hybrid and remote work arrangements has ushered in a new era of flexibility for workers, and given the low unemployment and shortage of labour post-Brexit many businesses find themselves having to continue COVID working practices ad infinitum. Employers are increasingly open to sourcing skilled professionals from a broader geographical pool, untethered by traditional office boundaries. This has had a tangible impact on the housing landscape. My worry for the unwitting homeworker is that long term, if a job can be done entirely from home, then it can be done at 25% of the cost to the employer in India or elsewhere. Statistics continue to confirm that England has one of the lowest productivity levels in Europe. All the while our European brethren have been back in the office two years or more by now. However, the good news is that working from home has, and is continuing, to support Michael Gove's leveling up agenda.

It's irrefutable that London's real estate comes with a premium average house prices exceeding those of other cities by more than twofold. One might logically deduce that investing in such a market would yield higher returns. However, the post-pandemic reality has revealed a different story. The traditional allure of London is being offset by the newfound possibilities of hybrid work models, causing a reshuffling of where to live and work-life balance preferences among residents. Longer travel distances are less of a worry if one only travels one day a week.

So, what will change the North-South divide in terms of property prices and desirability?

As businesses embrace flexibility and employees embrace the advantages of suburban living, cities like Birmingham and Manchester are emerging as more attractive options for those seeking affordable yet vibrant urban experiences. These cities offer the potential for a fulfilling lifestyle but without the exorbitant costs associated with London living. And, HS2 if/when completed will slash journey times to London with Birmingham just 40 minutes and Manchester 1 hour 20 - both suddenly then become pretty easily commutable.

The North-South divide is a longstanding socio-economic distinction that is now finally experiencing a unique evolution. There is a real foreseeable possibility that the UK could like most European countries and indeed the USA become a country with multiple desirable cities. The growing popularity of northern cities, with their compelling mix of modern amenities and attractive prospects. It is narrowing the gap that once separated them from their southern counterparts. The possibility of owning a property is becoming attainable in the North.

The reasons why property investors should consider investing in Manchester?

The attractiveness of investing in property stretches far beyond the previously warning Northern appeal. For instance, Manchester has emerged as a beacon of opportunity within the UK's property landscape. Renowned for its strong new-build market, Manchester offers properties at a lower price that therefore yield higher returns, than a London purchase would thank to its penchant for continuous developments. Manchester is underlining its position as a burgeoning investment hotspot. With multinational corporations like Kellogg's, Adidas, HSBC, and Media City UK establishing their presence in the city, Manchester's trajectory shows a potential influx of 20,000 new residents over the next three years.

The reasons why property investors should consider investing in Sheffield?

Sheffield, characterised by its green character, is a sustainable two-tier city in the UK. Ongoing restoration projects, valued at millions, propel economic growth and job creation. Sheffield's property prices remain remarkably affordable, averaging around 171,600. This affordability makes Sheffield an attractive prospect for property seekers and allows for lower-risk investments for potential investors.

The reasons why property investors should consider investing in Liverpool?

Liverpool labelled the "best place to live and work in the UK” is making steady strides in property price growth. The city offers investors promising yields of around five percent, a figure projected to rise further as Liverpool makes steady progress on multiple fronts. With regeneration projects galore, Liverpool is poised for an impressive transformation. An enormous waterfront revitalisation project is in the works, creating an expansive two-million-square-meter expanse for residential, business, and leisure activities.

The reasons why property investors should consider investing in Birmingham?

Birmingham, often lauded as the UK's "first Compassionate City" and likened to the "next Silicon Valley," has a future brimming with potential. An array of ongoing and upcoming regeneration projects sets the stage for Birmingham's ascendancy. The city's impressive record of constructing and delivering 2,398 new homes annually underscores its vibrancy. Transformative projects like Grand Central Birmingham are reinventing urban spaces and job markets.

The cost of living in London and the convenience of remote work have spurred a migration trend. Many go to our other cities for university - partly feeling it will be cheaper to live outside London and simply stay on. Both rent and Londoners are now exploring opportunities on the outskirts and partly because of the shortage of properties, and partly due to changing work patterns. This migration and investments in faster rail links have contributed to the rising demand for rentals beyond and north of London.