Property prices in the North-East of England and Cumbria have taken over from Northern Ireland and Scotland, now offering the lowest house prices across the UK. The average value of property in the UK increased by 5.1% in the year to June 2016 although prices in the North of England fell by an average of 1% over the same period.
Will long-term investors see value in the North of England where rental yields have increased as house prices have fallen?
Capital values
At this moment in time the average property price in the UK stands at around £205,000 although there are some significant regional variations. The average price of a house or flat in the North of England has fallen to just under £124,000. It would appear that the gap between the North and South of the England is growing with Scotland having recently exited what was a difficult period in light of the Scottish independence referendum.
It will be interesting to see whether we see a recovery in the North East of England and Cumbria with more investors now looking for long-term rental income as opposed to putting all of their eggs into the “capital appreciation basket”. The next few months could also offer an array of opportunities for those looking more longer term as the UK comes to terms with the possibility, although not yet an inevitability, of an exit from the EU.
Demand for private housing
While the short, medium and long-term performance of the UK economy will dictate demand for private housing, this is an area which is significantly under resourced across the UK. The North of England still has an array of vibrant local economies and if property prices continue to come under pressure we may see some companies relocate to reduce their overheads. Quite why there is so much doom and gloom around the North of England at this moment in time is difficult to explain because property prices in this region never really joined the property price appreciation rally of recent years.
Switching investment strategies
The last few years have seen many investors looking towards capital appreciation as opposed to long-term rental income with particular focus on areas such as London and South of England. There has been speculation for some time that property investors may well switch their strategies from pure capital appreciation plays to a mixture of capital appreciation, in the longer term, and rental income. If this is the case there are more than enough areas of the UK offering appetising rental yields with properties available at attractive prices.
Many property investors have had a long-term obsession with capital appreciation and often discounted the value of long-term rental income and cash flow. The initial confusion in light of the UK referendum on EU membership could see many investors re-evaluating their positions, their assets and their long-term aspirations. Many areas of the UK property market have been neglected for some time and those willing to put in the research hours could find some diamonds in the rough.