Over the last few weeks there has been much mention of the European Union, the EU referendum and the forthcoming UK exit from the EU. This has obviously caused some confusion and concern across investment markets with the property market apparently coming in for particular focus. It is therefore interesting to see that a recent report suggests that investors may be looking towards property in the North of England and Scotland as a means of offsetting slower growth in the south of England.
This is something which experts have been talking of for some time, the move away from the expensive south/south-east of England to the north and Scotland where prices are seen to be more affordable.
More affordable housing
As we touched on above, when looking at the North/Scotland and the South of England property markets there is a massive difference in the affordability factor. It would appear that investors and potential homeowners are now more in tune with the “more affordable housing” of the North of England and Scotland. Those looking to invest in these areas of the UK will also see a significant uplift in rental yields compared to the south of England. These two factors by themselves seem to be adding some kind of backbone to local property markets and pushing prices higher.
Improving local economies
Those who follow economies across the UK will be well aware that long-term focus always remains on London and the south-east while the likes of the Midlands, the North and Scotland are often seen as a second thought. Interestingly, there has been some improvement in local economies in these particular areas which is fuelling demand for property. We may well see many companies looking to move their operations to “cheaper areas of the UK” which would obviously attract a greater working population to these areas.
Low finance costs
Even though many experts thought the Bank of England would reduce UK base rates in July this was seemingly postponed until August. There is a growing opinion that any “definite” August reduction in base rates could also be postponed but we will see. The threat of lower UK base rates, as a means of supporting the UK economy as a whole, has ensured that mortgage rates are under downward pressure if anything. In reality a reduction in UK base rates of 0.25%, taking the rate to 0.25%, would have little impact in money markets but would cap any plans to increase mortgage rates.
When you bear in mind that some parts of the UK are offering double-digit rental yields, although the potential for capital appreciation will differ, this potential real return should not be dismissed.
Property sales numbers in the North of England and Scotland have held up better than those in the South of England although time will tell whether this continues. The same can also be said of property price rises with many people looking to review their thoughts and plans if the London and South of England economies slow in light of Brexit. This could, as we are starting to see, see a switch in focus to the North of England and Scottish property markets. Are we about to see the diversification away from London and the South of England that many property experts have been predicting for years?