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5 Things You Need to Know About the London Property Market Now

Here are 5 things that property investors need to know about the London property market now. 

UPDATED JAN 2020

Boris Johnson is now the Prime Minister and he sure has gotten his way to get Brexit done. Talks are going back and forth between the UK and EU, but back in London, it’s pretty much business as usual. Investors are getting off that fence that they were sitting on over the past two years. Looking into London property? Read on.

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Manchester Tops House Price Growth in UK

Manchester recorded a 7.0% increase in house price growth compared to London’s dismal 0.4%.

Manchester is England’s top performing city for house price growth, the latest data from Hometrack shows, while London remains on a flatline.

The data comes from the property research firm’s UK Cities House Price index, which tracks housing data across 20 UK cities and regionally.

For house price growth over the last 12 months, Manchester obtained top spot at a cool 7.0% increase followed by Birmingham at 6.5% and Liverpool at 5.9%.

Price growth in London showed no signs of recovery, staying at a stagnant 0.4%.

Across the UK as a whole, prices have gone up by 4.3% over the last 12 months.

Price Growth of UK Cities in last 12 months
Price Growth of UK Cities in last 12 months: Leading cities in the UK that outshine London.

Many cities in the Northwest have posted high capital gains over the average for the last 12 months. Yet, there is still much room for growth, as prices remain low, well under the national average.

The average price in Manchester was at £163,200, Birmingham is at a slightly lower £159,800, and Liverpool, at £118,800.

Comparatively, the average price of a home in Britain is £217,400.

Although price growth in London is stagnant, housing in the capital costs more than double the national average, at a whopping £491,200!

Average Prices in UK Cities
Average Prices in UK Cities: London prices are at stratospheric levels, making high yields and capital gains quite impossible.

Richard Donnell, Insight Director at Hometrack says that the London market is going through a period of price alignment, having posted some very large gains over the past 8 years.

“Over the last 12 months, average prices in London have grown by just under 1%. This is much lower than the annual average growth of 9% over the last 5 years. These averages mask a wide range of house price growth at a sub market level. Actually, house prices are falling across a third of London’s local authority areas.”

Homes in the capital have become unaffordable for many people after years of surging prices, while wage growth remains meagre and lenders apply tougher mortgage criteria.

However, the price gap between regional cities and the capital is narrowing.

Hometrack expects the gap in prices between London and other UK cities to close further over the next two years. This follows a similar pattern from 2002 to 2005 when London house price growth was relatively weak compared with the rest of the country, after a period of surging prices from 1996 to 2000.

Richard says, “We expect house prices to keep rising across regional cities such as Birmingham, Manchester and Edinburgh over the next two to three years. During this time house price growth in London will remain flat, with annual price rises of approximately 0-2%. As a result, the gap between house prices in cities outside of the south-east and house prices in London will continue to contract.”

Price falls in London will reduce the gap between it and regional cities
Price falls in London will reduce the gap between it and regional cities

Manchester and Birmingham are expected to be the first cities to move closer to London prices, with demand for housing likely to be boosted by strong job growth. They are forecast to return towards average prices being around half of those in the capital compared to a third today.

“The level of house price inflation seen in large regional cities during the last peak, between 2000 and 2003, gives a good indication of how much prices may rise this time around. If history is to repeat itself and these cities are to get back to where they were, then prices could increase by as much as 20-25%,” Richard adds.

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By Ian Choong

Sources:

  • https://www.theguardian.com/money/2018/jun/29/london-house-price-growth-at-nine-year-low-amid-edinburgh-and-manchester-spurt
  • https://www.hometrack.com/uk/insight/uk-cities-house-price-index/may-2018-cities-index/
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Birmingham’s Big Comeback

A bullish property market ahead for Birmingham (Img source: BirminghamLive)

Birmingham was once called ‘the first manufacturing town in the world’ and was the strategic heart of manufacturing Britain in the 20th century.

The rise of the city in the immediate years after World War 2 led to fears at the top that it was becoming too powerful at the expense of the rest of the country. The government moved some 200 industrial firms and projects out of the region to other parts of the country, which dealt a devastating blow to the Brummie economy.

The once-great city fell into a steep decline in the 1970s, and unemployment rose from zero to close to 20%. In just a couple of decades, Birmingham transformed from the manufacturing powerhouse of a fast-growing Britain to a symbol of failure.

Today, however, paints a very different picture.

All Eyes on Birmingham

The city is currently enjoying a burst of economic success, owing its change in fortune to a pro-development attitude by the Labour-run council and a well-judged government decision to press ahead with important transport infrastructure.

Birmingham’s Big City Plan, announced in 2010, sets out a development masterplan that  aims to expand the city core by 25%. This will add £2.1bn yearly to the city’s economy.

As part of the plan, £4bn in transport improvements have been announced to transform road and rail links in the city. Birmingham is the first stop on the High Speed Rail (HS2) coming from London, which will put the city’s more than 1.1 million people within under an hour’s journey of the capital, when it is ready in 2026.

As it is, Birmingham is the most popular destination for people moving from London. More than 6,000 people left London for Birmingham last year, according to the Office for National Statistics (ONS), and it looks like the HS2 will continue to inspire this exodus in the coming years. The second, third and fourth most popular destinations were all within 80km of London.

Birmingham is the most popular destination for people moving from London (Img: BBC)
Birmingham is the most popular destination for people moving from London (Img: BBC)

Businesses are also relocating from London to Birmingham. HSBC’s new head office for its retail and business lending operation, is due to open in July 2018. The bank’s move brings with it more than 1,000 of its existing London staff, and will employ some 2,000 people when it opens.

Deutsche Bank has also expanded its operations in Birmingham, with a total of 1,500 employees in front and back office capacities.

Property Market Outlook for Birmingham

The average house in Birmingham costs £162,701, just over a third of London’s average at £478,853. Office rents in Birmingham are also about a third of those in the capital.

Little wonder, then, that many Londoners and businesses operating in the capital are choosing to move to Birmingham.

Nevertheless, as with other parts of Britain, the supply of housing in this Brummie city hasn’t quite kept pace with demand, charting a potential shortfall of some 30,000 homes.

The deputy leader of Birmingham City Council, Ian Ward said: “Our expanding population means that we need to provide around 80,000 new homes by 2031 and our urban area does not have enough space. If we don’t explore other options we will have a shortfall of 30,000 homes.”

Supply of land is scarce and constrained by the greenbelt, which is a legally protected green area surrounding the city, and not allowed to be used for development.

With the shortfall in housing, rental demand is growing due to an ever-increasing affordability gap for the city’s young population trying to get on the ladder.

JLL predicts an increase in build-to-rent housing with a shift of focus from price towards quality and location. They forecast prime values to hit £500 p.s.f. by 2020 with performance being strongest in the city centre.

Compared to London, Birmingham is still currently 60% cheaper for a new-build project, suggesting significant upside potential.

Investors can look at new-build apartments like Arden Gate in the city centre as a great option for investment. This development has an attractive location, being only a few minutes’ walk from the central transport hub of New Street Station, which has just undergone a £600m renovation. It is close to entertainment and shopping centres and major businesses, including the HSBC head office.

In a 2017 survey, PwC ranked Birmingham as the highest performing UK city, ahead of Manchester, Edinburgh and London.

Regional chairman of PwC in the Midlands, Matt Hammond said, “This may be, in part, due to the big improvements in the city’s infrastructure, including the continuing development of HS2, the extended tram lines and the halo effect created by the redevelopment of New Street Station and the opening of Grand Central.”

Real estate consultancy Knight Frank predicts 19.7% rental growth by 2021, and 23.5% house price growth by 2022, further building investors’ confidence that Birmingham is a high growth market with a promising potential for high returns.

What are your thoughts about the city of Birmingham? Drop us a comment below. If you are interested in Birmingham’s investment potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong


Sources:

  • https://www.ft.com/content/26c293dc-fe12-11e4-8efb-00144feabdc0
  • https://www.ft.com/content/d6c58242-b280-11e7-a398-73d59db9e399
  • https://www.birminghampost.co.uk/business/business-news/birmingham-finally-bouncing-back-after-8772639
  • https://www.birminghammail.co.uk/news/business/birmingham-among-top-cities-job-14435552
  • http://www.birminghamupdates.com/birmingham-remains-britains-leading-regional-city-for-start-up-creation/
  • http://www.itv.com/news/central/update/2013-10-11/plans-for-51-000-homes-near-birmingham
  • PwC Emerging Trends Europe Survey 2017

 

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London Falling

Not all about London anymore. The London housing market is struggling with prices falling for the first time in 8 years. At a record drop of 0.6% in September this year, London is the weakest performing region in the UK for the first time since 2005. Image credit: http://bit.ly/2gcAlkU

Increasingly, statistics reveal that growth is expanding outside London. The focus — be it for housing, jobs, resources, or investment — has moved to buzzing regional cities where business is booming on the back of lower costs and a higher quality of living.

The London housing market is struggling. Nationwide reports that London house prices have fallen for the first time in 8 years, and, at a record drop of 0.6% in September this year, London is the weakest performing region in the UK for the first time since 2005.

Outside London and across the UK, however — despite Brexit and concerns about the economy — prices are still rising, albeit at a slower pace than in recent years. And yet, while London’s house prices may have dropped, they remain unapproachable compared to the cities beyond.

To date, house prices charting the most significant increases in England and Wales are the Midlands* and Northwestern cities of Manchester and Liverpool, as well as in some pockets off central London like Luton and Guildford, and Northern Ireland.

A chart published recently in the Financial Times shows house prices falling in London and the South East but growing elsewhere. Image credit: Financial Times; source: RICS

Greener Investment Pastures Beyond London

Years of rapid price increases have made London and the south unaffordable to many buyers, prompting them to buy further away and commute. After all, it takes less than an hour to travel from Bedford or Luton  to central London by train, while cities like Birmingham, Manchester and Liverpool have a buzzing business scene.

The signs have been there for a while now, says Virata Thaivasigamony of CSI Prop, an active property investment consultancy in Kuala Lumpur, Malaysia that promotes investments in UK and Australian property.

“The writing has been on the wall for some time and we’ve said that prices in London will flatline this year. London has always been regarded as the business capital and startup central of the UK, but the fact is that businesses and investments are moving outside of London and into the regional cities. It would be remiss of us to ignore that the best places to invest in are now in those cities,” he elaborates.

What’s Trending

Manchester, popularly assumed as UK’s second city and the Silicon Valley of Britain, is fast earning a reputation as the hotbed of tech and startup talent in the UK, thus pushing property prices up. The city is also a recipient of billions in investment dollars, thanks, in part, to the government’s push for the Northern Powerhouse, propelling the rise in investment returns across central and Greater Manchester, including Salford as well as other Northern Powerhouse core cities like Liverpool.

Prices of property have been rising in Northwestern cities such as Manchester, as more corporations move from London to this city to set up headquarters and make use of its resources and talent pool. Image credit: http://bit.ly/2hEX3Um

Corporations are decentralising from London to the regional cities, too. BBC, ITV and HSBC come to mind, having set up home in Greater Manchester; airlines such as Hong Kong’s Cathay Pacific have since 2014 provided direct flights between Manchester and Hong Kong, while China’s Hainan Airlines launched a direct flight service in 2016, making Manchester Airport the only British hub outside London to have non-stop flights to Beijing.

Meanwhile, Berkeley, one of Britain’s best-known luxury housebuilders has broken out of London to build a business in Birmingham to cater to housing demand in the city.

Javad Marandi, a British businessman with investments in commercial and residential real estate says, “Regional markets including the North East, the South West and Yorkshire and Humber have shown growth in commercial property activity, a sure sign of a growing business environment with an increasingly positive outlook, making them one of the best regions to invest in. Building a workforce, free of soaring London living costs, will in turn be cheaper to employ – and no doubt happier with the favourable cost of living outside the capital.”

That Britain is plagued by a serious undersupply in housing is an understatement. Opportunities in these cities have expanded the population, further underscoring the acute demand and need for housing. From a property investment standpoint, this is a good thing.

Meanwhile, a number of university cities are showing a spike in house prices. Towns that are home to a large student population such as Guildford and Liverpool, are seeing a surge in prices. The biggest 3-year percentage house price rise was near the University of Bedfordshire, which has its main campus in Luton, charting a 42% increase in prices over the period of an undergraduate degree.

“The best regions to invest in lie outside the capital – it’s no longer all about London,” Marandi concludes.

Statistics by RICS indicate that house prices are set to rise across England next year except for London. Image credit: Financial Times; source: RICS

Growth Outside London  

The UK is still seen as a good and safe place to invest your money due to a weakened pound, and, in spite of uncertainties arising from Brexit.

House prices will continue to rise as demand increases and Britain grapples with a chronic housing undersupply, but it appears — for now — that the best investment opportunities lie in regional cities like Manchester and Liverpool, and the outer boroughs of London.

That said, it is crucial to note that London is a market within a market, with characteristics of its own, and that it will bounce back — just as the housing market in the Midlands* bounced back from a low in 2015 to become one of Britain’s fast-growing housing markets today. On a positive note, it is during these low-market times that savvy investors invest in order to reap the most luscious of fruits when the market bounces back.

Article by Vivienne Pal


CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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UK Property Outlook 2017

Housing Shortage Continues to Drive UK Property Market Growth in 2017

Summary

Lack of housing in the UK remains the top driver of housing market growth in the UK
Property markets in regional cities like Manchester have surpassed London
UK student property remains resilient to Brexit, growth predicted to hit £45.8bn by Sept 2017
Brexit effects still muted, international investors have greater appetite for UK real estate

Image credit: http://bit.ly/2hNtoqD

The year 2016 was an eventful one for the UK property market, influenced significantly by changes to the stamp duty and Brexit. While these events will continue to underpin market growth in 2017, the critical lack of housing remains the market’s main driver, supporting property prices. This article highlights the various issues that will dominate the UK property landscape in 2017.

Brexit Aftershock – A Final Window of Opportunity

The market calmed down fairly quickly following the results of the EU Referendum. Fears of an immediate house price crash after Brexit have abated with overseas investors particularly gaining a strong appetite for UK real estate, fuelled by the drop in the pound. As 2017 reopens with the spectre of Article 50, we foresee the same uncertainty surrounding the property market following Brexit in 2016, remaining in 2017. PM Theresa May received landslide votes in Parliament on Feb 8 to trigger Article 50, yet this will not change the fact that Brexit shall be a long-drawn affair.

Appetite for UK property stands to remain strong among overseas investors during this window of uncertainty when the sterling remains at its lowest levels since 1985. The Bank of America has advised its clients that it expects the sterling to suffer one last plunge — its lowest — when Article 50 is invoked (expected end March) and that this will be the best time to buy the sterling as the currency will strengthen after official Brexit negotiations get underway. The bank believes the sterling will recover in a V-shape rebound and that currency markets will no longer react to Brexit following this.

We have always believed that London and the UK are resilient and will remain an important global landmark; the market shall right itself around and the pound will rise again once the chaos calms and uncertainty reduces. We anticipate that investment volumes will recover next year, but until then, now is a good time to invest in UK property while the pound is at its weakest.

 

UK Student Property Remains Top Investment Asset

Just as it did during the economic downturn, UK student accommodation is proving resilient to concerns about Brexit. The Universities and Colleges Admissions Service (UCAS) reports that the number of students for 16/17 is set to exceed the previous year. While it may be that the weaker pound is more attractive to overseas students, it also proves the ongoing demand for UK higher education. JLL released research showing that at the start of the 2016/17 academic year, almost 522,000 students were enrolled on undergraduate courses at UK universities, an increase of more than 7,000 on 2015 while the number of acceptances of EU students rose by 8% y-o-y.

We strongly foresee that UK student accommodation is set to remain popular due to its recession-proof qualities, alongside supply still unable to keep up with demand across the UK. There will be growth in overseas investors due to the favourable exchange rate. Knight Frank predicts that UK’s purpose built student accommodation sector is set to reach a total value of £45.8bn by September 2017 while rental growth of 2.5% is expected. The sector has grown by 37% since 2014, from £30.9bn to £42.5bn, making it one of the fastest growing asset classes in the UK property market.

 

House Prices Continue to Increase

The UK housing market is a tough cookie, staying resilient in the toughest of times.

Figures by the Office for National Statistics (ONS) for October 2016 showed that house prices across the UK grew 6.9% y-o-y. While this may be the lowest growth figures recorded since end 2015 (the market slowed mostly due to stamp duty and other tax changes), this is still strong growth nonetheless, driven by the general undersupply of housing across the UK. The Royal Institution of Chartered Surveyors (Rics) predicts that UK house price growth will slow down in 2017, but that the legacy of insufficient housing will see demand continue to outstrip supply, leading to a 3% rise over the year. The weaker pound will prove favourable to international investors.

 

Britain’s Crisis: Housing Remains Critically Undersupplied

Some 250,000 – 300,000 houses need to be built every single year to tackle soaring house prices and home shortage in England. The latest figures show that only 190,000 homes were added to England’s stock last year — the highest number since the financial crisis. With the current uncertain climate, there are fears that fewer homes will be built in 2017, with Jones Lang Lasalle (JLL) suggesting that the number of housing starts (ie start building) could fall to 134,000 (from 147,880 in 2016).


Rents Continue Rising

Data from Savills shows house prices vs rental. Image credit: BBC

Despite the change in stamp duty affecting landlords, there remains a significant community of renters in the UK, due to the critical undersupply of housing and prices at inaccessible levels. Commentators predict rent rises of 2%-3% across the UK; Savills has forecast a rise of 2.5% in 2017, while in London the increase will be at 3% as more people share homes to split the cost. In fact, Savills has predicted that rents would rise faster than house prices i.e. at 19% between now and 2021 while house prices only rise by 13%. Rics suggests that rents will rise by about 5% p.a. for the next five years because of strong demand and shortage of properties.

PwC’s research into housing affordability for generation rent shows that buyers may now have to save for 19 years in order to buy their first home (assuming deposit is raised entirely from their own savings without family assistance). In 2000, the same group would have been able to buy after saving for just 6 years, and in 1990 it took only around 2 years.  PwC estimates a generation renter starting to save in 2016 can now buy in 2035. See our article: Britain, A Nation of Renters?

Manchester Knocks London Out in Price Growth

For the first time in 7 years, London is no longer within the top three growth regions in the UK as the effect of Brexit is more keenly felt in London. Regional cities like Manchester and Birmingham are in the spotlight due to better public realm improvements and more students choosing to stay and work in these cities. Manchester is leading the price growth among key cities in the UK, recording rises of 8.9% y-o-y as demand exceeds supply and unemployment falls. The outer boroughs of London are posting faster growth rates than the inner boroughs and this trend is looking to stay this year.

House price growth rates: inner vs outer London boroughs. Source & credit: CBRE

Rightmove’s most recent report, based on asking prices of properties for sale, shows a steady start to 2017’s housing market, with annual growth in the East and South-East regions of England significantly outpacing London and the South-West. Again, prices are being bolstered by a lack of housing, meaning that demand continues to outstrip supply.

Conclusion

There is strong potential in the UK real estate market as it is not as affected by Brexit as many think. UK student accommodation is a good investment asset as we see increased interest and investments into the sector, even from among our own clients. Key to strong returns is to buy in cities with  good universities and accommodation undersupply. For residential property, we have always maintained that Manchester is the city to focus on while outer boroughs of London, particularly East London (especially areas with Crossrail accessibility) will bring better returns than inner London.

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CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Gen-Y: The Future of the UK Property Market

Part 1 of our Manchester series underscores research highlighting Manchester as the UK’s no. 1 property investment hotspot in the next 10 years. In Part 2, we discuss why Manchester is poised to have the strongest rental market in the UK.


Video credit: Select Property Group

According to Savills, demand for rented accommodation has increased by 17,500 households per month over the past decade to 2014. This demand for rented homes is set to rise by more than 1 million households over the next 5 years.

The private rented sector in Manchester is slated to boom with over 10,000 new build-to-rent units are due to be built over the next few years. This is due largely to the Mancunian city’s largest concentration of young working adults, i.e. the Generation Y.

7 Reasons Why Generation Y is the Future of the UK’s Property Market – Select Property Group

  • They do not want to be tied down with long-term mortgages
  • Career-focused; they stay in roles for shorter lengths of time as they progress later in life
  • Prefer to live in dense, diverse urban villages
  • Demand ceaseless access to technology and fast-paced information
  • Professional and educated with a good work-life balance
  • Value practical amenities that make living easier
  • No expectation to own a property – success is defined in other ways

#DidYouKnow that Manchester is home to over 60% more 25- to 29-year-olds than the national average? (source: Manchester Property Guide 2015)

Manchester has the youngest working demographic in the whole of the UK.

Why is Manchester the Fasting Growing Generation Y City

  • The city’s population is rising quicker than any city outside of London and 2.85 million people will live there by 2025 – 89% of this new population is Generation Y.
  • It means over 60% more 25 to 29-year-olds live in Manchester than the UK average. This Generation Y market accounts for 22% of Manchester’s overall total population, almost 4 times the national average
  • A huge 85% of people living in Manchester city centre now privately rent and 70% of the population is classed as BINKY – Big Income, No Kids Yet
  • 58% of graduates from the Greater Manchester universities enter employment in the local area. That’s almost 20,000 new workers a year. Every year.
  • Aspirational and career-focused young people are naturally drawn 70,000 new jobs will be available to them over the next decade.
  • City targets state Manchester needs 4,000 new units a year to house its rapidly growing Generation Y market. Only 1,417 annual units are set for delivery over the next eight years. Two-thirds of this supply is still subject to planning.

This post is originally published by Select Property Group.

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260