North England Property: Why the North Leads
North England property investment has evolved, shaped by government policies, economic changes, and shifting social trends over recent years. Now, more than ever, those looking to invest in property need to understand these changes. Notably, the north of England has emerged as a leading choice for property investment, with promising returns and strong demand.
This article explores the reasons behind this shift and why the north stands out as a lucrative opportunity for property investors.
The Evolution of UK Property Investment
The UK property market has experienced a series of transformations over recent decades, with various elements influencing trends. Government policies, economic downturns, and events like the COVID-19 pandemic have impacted the housing market. Consequently, property investors’ strategies have changed.
Despite these changes, property investment remains a resilient asset class. For many, investing in property offers a reliable avenue for long-term wealth creation, with housing prices generally appreciating over time. The private rental sector, in particular, has seen substantial growth, as high demand from tenants outpaces the available supply of homes.
The Importance of Location in Property Investment
Location has always been a critical consideration for property investors, but the best-performing areas have shifted in recent years. Where the south of England once held prominence, the north has increasingly outperformed in terms of property price growth and rental yields. Regions like the North East, North West, and Yorkshire saw the fastest price rises in the past decade. As a result, these areas attract more investors.
Property Price Growth in the North
According to major property indices like Rightmove, Halifax, and Nationwide, northern regions have seen remarkable growth in house prices over the last decade. Cities like Manchester have become key hubs for property investment, partly due to their strong rental markets. The city has been recognised as one of the best places for landlords, with high demand from young professionals drawn by employment opportunities and relatively affordable living costs.
Why the North Offers Better Value
Despite rapid price growth, the north remains more affordable than the south, attracting investors seeking high returns without the prohibitive costs associated with southern cities. Property in the north generally provides better value, which appeals to both seasoned investors and those diversifying into lower-cost areas.
Property Affordability in the North vs. the South
The Office for National Statistics (ONS) reports that, on average, properties in England cost 8.3 times the annual full-time salary. However, this affordability ratio is considerably lower in northern regions, where property prices align more closely with local incomes. In contrast, London has some of the least affordable properties, with 82% of local authorities showing affordability ratios over 12. This limits homeownership and prolongs rental demand, as tenants are often unable to afford to buy.
For investors, this affordability means that buying properties in the north is a financially viable option, particularly for those looking to expand their portfolios without the financial constraints of higher-priced regions.
North England Property: Tax Considerations for Property Investors
Tax policies can significantly affect property investment, and recent government changes have impacted where investors choose to buy. Since the Labour Party introduced its latest budget, raising the stamp duty surcharge for additional properties from 3% to 5%, investment costs have increased.
Lower Stamp Duty Costs in the North
One advantage of the north’s lower property values is a reduced stamp duty bill, which can be an important consideration when evaluating potential investment returns. With stamp duty calculated based on property value, investing in northern properties presents a more affordable option.
Data from Paragon Bank in August 2024 showed the average property purchase in Greater London was £739,166. This resulted in a stamp duty bill of £46,633, based on the previous 3% surcharge. In contrast, the average home in the North East cost £186,520, resulting in a significantly lower stamp duty bill of £5,595. Similar savings apply in regions like Yorkshire and the Humber, with stamp duty costs of around £6,620, and the North West at £6,816.
Lower tax costs make these regions particularly appealing for investors seeking to maximise returns while minimising initial outlay.
High Rental Yields in the North
Understanding potential rental income and yields is crucial for property investors. In recent years, rental yields have become a key consideration, especially as mortgage costs have risen. In terms of rental returns, northern England has consistently outperformed other regions.
Comparing Rental Yields by Region
Paragon Bank research shows the North East leads in rental yields. Properties there earn an average income of £15,160, with an 8.13% yield. Wales follows closely with a yield of 8.07%, while the North West and Yorkshire and the Humber offer yields of 7.84% and 7.54%, respectively. London, on the other hand, has a much lower average rental yield of 5.56%.
Higher rental yields offer better income relative to property value. As a result, northern properties attract investors seeking steady rental income.
North England Property: Strong Tenant Demand in Northern Regions
For buy-to-let investors, tenant demand is a crucial factor in choosing an investment location. Regions with strong tenant demand not only reduce the likelihood of property vacancies but can also drive up rental rates over time. Northern regions have demonstrated robust tenant demand, making them a preferred choice for landlords.
High Tenant Demand Across the North
Paragon Bank reports that 81% of landlords in the North West have observed strong tenant demand, followed by 78% in Yorkshire and the Humber, and 68% in the North East. This demand can be attributed to several factors, including employment opportunities, university locations, and regeneration projects.
Cities like Manchester, Leeds, and Liverpool are experiencing population growth due to their expanding job markets and relative affordability. University towns and cities also tend to have higher proportions of renters, adding to the demand for rental properties.
North England Property: Economic Growth and Regeneration in the North
Investment in infrastructure and regeneration projects has further boosted the appeal of the north for property investors. Government-backed schemes and private investments have led to significant urban development, particularly in cities like Manchester, Liverpool, and Leeds. These improvements not only create jobs but also enhance the quality of life, attracting more residents and, in turn, driving demand for housing.
Key Regeneration Projects
Notable regeneration projects include the Northern Powerhouse initiative, designed to boost the economy of northern England. This project has spurred significant investments in transport, business, and housing, particularly in cities like Manchester. The expansion of Greater Manchester’s Metrolink network has made commuting easier for residents. This improvement further boosts property demand.
Such developments play an essential role in sustaining tenant demand and boosting property values, making the north an increasingly appealing option for investors.
Balancing Rental Income with Capital Appreciation
While rental yields are a primary concern for many investors, potential capital appreciation also plays a role in property investment decisions. Although property prices in the north are generally lower than in the south, the rate of price growth in northern regions has been notable. This trend suggests that investors could benefit from both rental income and long-term capital gains.
The Outlook for Capital Growth in the North
While the future is never certain, the trend of northern price growth is promising. Many analysts predict that regions like the North West and Yorkshire will continue to see property price appreciation due to the high demand for housing, economic growth, and regeneration projects. For investors seeking a blend of rental income and capital appreciation, northern England presents a balanced investment opportunity.
Conclusion: Why the North of England Remains a Top Choice for Property Investors
The north of England offers a compelling combination of affordability, high rental yields, strong tenant demand, and economic growth, making it a top choice for property investors. The UK property market constantly evolves, yet the north shows resilience. Its growth potential suggests it will remain profitable.
As the market adjusts to new policies and economic conditions, understanding the nuances of each region and staying informed on market trends will be essential for successful property investment. Consider property investment in northern England for promising returns. Additionally, these opportunities can enhance a well-diversified investment portfolio.
