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England’s North West: What Rising Rental Values Might Mean There
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George Osborne’s vision of a “Northern Powerhouse” might already be having an effect. It could mean the advance of cities outside of London is underway.
The Kent Reliance Buy to Let Britain Report, a key reference point for private landlords in the UK, had a startling figure in its May 2015 edition: England’s North West region provided by far the highest current yield of 7.1 per cent. Yields are a measure for long-term property investors, a number that highlights the level of income (rent) received on a property relative to the value of the property.
For large and small investors interested in real asset funds, this is worth noting. Many investors in residential property do so with an eye on income, which this number - one month’s result notwithstanding - suggests can be maximized in an unexpected place.
The characteristics of property in the North West, much like many areas outside of London and the South East, are that those assets - existing buildings and land - are priced relatively low. But the fact that rental income is strong in places like Allerdale, Workington, Manchester, Merseyside, Lancashire and Cheshire suggests something important. If rents are rising there, the greater demand on the housing stock will cause those properties to increase in value over time.
And that might be already happening. While single-month indicators do not predict long-term trends, The Telegraph reported Land Registry statistics in early June 2015 regarding price rises from March to April: “Home owners in the North West benefited from 2.1 per cent growth [in prices] and those in Yorkshire & The Humber by 2.7 per cent – the largest rise of any region.” The Land Registry numbers were smaller for the East (0.3 per cent rise) and the South East (0.8 per cent).
On a somewhat larger scale than the one-off buy-to-let landlord, investors in UK property funds pay heed to local and regional economic trends. If they can buy land before the area experiences growth, they make more money. Property funds typically acquire land that is unused and ready for planning authority approval for a new use. If the goal is housing to accommodate a growing economy, the signs of growth are often found in both the native industries and those that will benefit from Government stimulation.
The North West economy is historically based on a broad variety of things: salt, chemical manufacturing, energy (renewables, nuclear and fossil fuels), food processing, pharmaceuticals, shipbuilding, transportation and tourism in the Lake District.
The district recently received a boost in Government funding to improve the Port of Workington, which will enhance the shipping capabilities of the region as well as the local manufacturing sector. In addition, Chancellor George Osborne issued a blueprint for growing the British economy in mid-2015 that contains a prominent directive to promote “a rebalanced economy and a thriving Northern Powerhouse.”
What might that powerhouse include? Osborne’s ideas include the following:
• Devolved powers to Greater Manchester, including consulting on Sunday trading and planning powers.
• Providing a statutory footing to Transport for the North (TfN), a focused remit “including working to introduce Oyster-style integrated and smart ticketing across the North.”
• TfN will be underpinned by £30 million of additional funding over three years to advance its work programme. TfN will also have a Chief Executive and Chair.
• TfN will also push forward plans to transform east-west rail and road connections and explore options for a new Trans Pennine Tunnel.
In summary, Osborne says “the Northern Powerhouse is a vision based on the solid economic theory that while the individual cities and towns of the north are strong, if we enable them to pool their strengths, they could be stronger than the sum of their parts.”
Is a property fund the best way to invest in UK land? Individuals should consult with an independent financial advisor to set broad strategies as well as to consider individual investments.
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