The north has long been overtaking the south of the UK in the competition for the highest yields and best opportunities for investment; and 2019 is predicted to see the north strive further ahead, even with Brexit on the horizon. Big cities and smaller towns in the north alike are all seeing competitive yields and high rental demand. Areas like Kelham Island in Sheffield have even received awards; Kelham Island was recently awarded 'Best Neighbourhood in the UK & Ireland' in the 2019 Urbanism Awards.
Property in the north has always been lower cost that property in the south which has allowed investors to reap higher yields. However, until recently these higher yields haven't been an attraction to many investors, with a high number still choosing to invest in the London market. Unfortunately, with a downturn in the London market and the lack of international investment in the capital, more and more investors (and developers) are looking to the north for their opportunities. Over the past twelve months alone, we have seen the number of investors in northern projects skyrocket compared to those who are new investors in the south.
Knight Knox stated earlier this year that if investors and landlords want to be getting the best deal for their money in the UK they need to be looking in up-and-coming areas where prices are low - of which the north has an abundance of opportunities. With recent trends, these areas are the most likely to see good capital gains and the highest net yields in the coming years.
"City centre apartments will always be popular, especially if they include parking. Rental tailored to young professional couples and upmarket flat shares are in greatest demand" - The Telegraph
Whilst famous for its financial services that have drawn both investors and professional tenants in, London is falling behind the progression and growth of the north's technology, science and manufacturing economy. Regeneration in the services sector, infrastructure and in the general area, has boosted interest in the area also. In the past few years major hotspots like Liverpool, Leeds, Manchester and Newcastle have seen over £3.4 billion pumped into growth projects, £70 million into improving schools, and £13 billion into transport.
Recent research by Your Move stated that investors in the northern regions have long been enjoying the highest yields, with average yields much higher than opportunities in the south. In fact, it's the north east that is the highest earning (for average yields across all property sectors) area with an average rent of £524/month and 5% annual gross yields (a 0.34% increase from September to October 2018). Other areas showed average net yields of; 4.8% in the north west, 3.1% in London, 3.31% in the south west, and 3.32% in the south east. However, the south did see higher rises in rent than the north, closing the divide between yields in the north and south, with rent in the south rising 4.3% in November 2018 (1.18% higher than the national rise), with the average rent now at £701/month.
Martyn Anderson, national lettings director at Your Move, said: "Properties in the north appear to offer high percentage returns to property investors and, as a result, they are attracting interest even more. This strong appetite to buy has been accompanied by a rise in demand for rental properties, since the north in attracting many young professionals and families with its good transport links and job prospects. As the London market continues to gently slow down, other regions are coming to the fore and proving attractive to investors."
It's not just the cost of investing that is drawing property moguls to the area. Developers are being drawn to opportunities for sites further north to take advantage of the lower building costs. With lower wages, the cost of building or renovating a property is smaller in the north both in terms of labour costs and raw materials. These lower costs also mean that developers in the north are able to add more benefits of their potential investors and tenants.
"Many of the new developments are PRS [private rental sector] only, which means they are not available to buy as an owner-occupier, but investors can put their money into the development. These developments play on the benefits that renting can offer, such as a prime city centre location, gyms and concierges," says Rob Bence, co-founder of The Property Hub.
Buy-to-let investors in particular are flocking to the north, especially to cities like Liverpool and Manchester, drawn by high yields and low prices. And it's not just the north west that has seen an influx of investment - Yorkshire and Newcastle are also climbing the tables for investment opportunities. In June 2018, Liverpool was at the top of the tables as the best place to reap high investment yields in the UK by mortgage broker Private Finance. They noted that the city had the best opportunities for savvy investors. However, Numbeo - a consumer price database - reported that Sheffield had the overall highest yields across the country, reaching as high as 12.1% gross.
Regeneration projects are also attracting investors to the north, with projects like the Northerns Powerhouse scheme bringing more international investment and predicted capital growth in the future.
Richard Forman, head of sales and marketing at Delph Property Group, said a "strong local economy and a housing shortage: was one of the reasons why investors were showing preference to the north. "Manchester has become a media hub second only to London, and Liverpool's new superport is creating new opportunities in logistics and shipping. The universities are feeding the jobs boom, and demand for housing is having a knock-on effect on rents, which are at record levels. Young professionals are a significant demographic and there is clearly an appetite for stand-out apartments that are centrally located with great shops, restaurants and a vibrant evening economy on the doorstep."
Connectivity is also something which has seen investors flocking to the north, with major projects such as HS2 and the Northern Powerhouse Rail (HS3) underway already. The north is also soon set to boast the world's longest underground road tunnel which will stretch across the Pennines, cutting the commute between Manchester and Sheffield significantly. These new rail projects are predicted to not only cut commuting times, but are also expected to bring over 850,000 jobs to the areas along the route.
A change in the wants and needs of renters has also seen a shift from south to north. Known as the "university effect", which has seen more and more northern towns and cities grow their retention rate of graduates significantly, these areas are seeing growth from demand for high-quality rental accommodation. Plus, it's not just the retention rate of student who have studied in the area - research has shown that university graduates originally from northern towns are relocating back to these areas after they graduate, particularly from more southern universities.
Jonathan Stephens, managing director of Surrenden Invest, echoes the "university effect" phenomenon, saying that millennials no longer want cheap accommodation. They are much more willing to pay more for high-specification housing that offers other benefits such as on-site gyms. The demand for high-quality property that offers a better work-life balance and close by social hotspots making places such as Salford in Manchester areas to watch.
Artificial intelligence company, One and Only Pro, developed last year an AI-powered investment portal which collated data from buy-to-let properties across England and Wales. This data then ranked the top 172 areas for buy-to-let opportunities using a unique algorithm.
Property Reporter, a leading news outlet for property investment, analysed the portals findings. "Investment properties across England and Wales were given a score from one to ten, with properties rates 'ten' being the most likely to increase in value. Dubbed the 'Diamond Property Hotspots' by property experts, the five locations with the highest concentration of top scoring properties can all be found in the north west of England.
"With 21% of 'Diamond' properties, Salford was top of the list. Properties in this area given the top score by One and Only Pro include a three-bedroom flat values at £130,000; it has a 12% potential yield and expected income of £1,300 per month."