Many people would argue that the South of England and London have most to lose from the recent EU referendum as these areas are the hub of the UK economy. As is often the case, the North of England does not necessarily get the coverage it deserves with property price movements in the South of England apparently “dictating” headlines for the rest of the country. However, there are signs that the North of England is actually benefiting from the proposed UK exit from the European Union.
Cautious optimism
At this moment in time nobody really knows how the UK economy and way of life will change post Brexit. However, what we do know is that June saw mortgage lending across the UK hit an eight-year high of £20.7 billion. This is a 16% increase on May this year and would seem to indicate that many investors and homeowners are ignoring so-called “project fear” which was the Remain campaign. While it may be a little too soon to talk about the full impact of Brexit it is by no means the nightmare scenario which many had painted.
City property markets
Across the UK an array of cities have reported double-digit growth in property prices to the year ended June 2016. The average increase was just over 10% which compares extremely favourably to the figure of 6.9% to the year ended June 2015. There is now renewed interest in areas such as Manchester, Liverpool and Leeds where there was a strong Brexit vote in the recent referendum.
In just the last quarter we have seen the average Manchester property price increase by 9%, Leeds by 7.6% with Liverpool showing an increase of 6.1%. While the performance of Sheffield property prices (4.3%) over the quarter and Newcastle (up 3.6%) do not compare to the price increases seen in Manchester, Leeds and Liverpool, let’s not forget the likes of Sheffield and Newcastle have been shunned by many property investors for some time. The fact we are starting to see an increase in interest flowing further north than ever before would suggest a change in investment strategy by some investors.
Of the U.K.’s 20 largest cities Bristol was the number one in terms of property price performance with year-on-year growth of 14.7%.
Are trends changing?
In light of the short to medium term uncertainty caused by the European Union referendum it does look as though investors are now looking towards more “value for money” investments such as property in the North of England. These areas have historically produced very attractive rental yields but compared to the South and London property markets the level of capital appreciation has been significantly less. It may be that some investors are now looking towards more long-term buy to let investment with relatively high rental yields or are they looking for a safe haven for their property funds in the short term?
It is intriguing to see the way in which some investors are reacting in light of the short to medium confusion caused by the recent EU membership referendum result. However, the fact that more property investors are looking away from the South of England and London is a significant development going forward.