While the London property market continues to go from strength to strength, it seems as though more and more investors are now looking outside of the capital. While the vast majority of regional markets are showing relative strength one exception is the Scottish property market where activity continues to rise but property prices seem to be falling in the short term. Is it now the time for property investors in the UK to study regional property markets in more detail?
Even though the North/South property divide continues to grow in real terms this does in many ways mask the growth in northern property markets and increased investor interest.
The ripples of economic recovery
It goes without saying that any recovery in the UK economy begins in London and slowly but surely the ripples of economic recovery will reach the far-flung corners of the UK. We are starting to see the ripple effect moving north and moving south of London with a general increase in optimism towards the economy which is starting to feed into local property markets.
Quote from PropertyForum.com : “The UK government has brought forward the so-called Help to Buy scheme which allows first-time buyers in the UK to secure a 95% mortgage due to the fact that part of the arrangement will be guaranteed by the UK government.”
As a consequence, a number of large scale property investors in the UK are now looking towards regional markets with many looking at so-called “university cities”. This perfectly illustrates the growing strength of the regional rental market and the fact that improvements in technology are still having an impact upon business costs with no necessity now to be centred in and around London – with the only possible exception being the financial markets.
Relative value for money
In relative terms there are a number of investment opportunities outside of central London where the value of property relative to local income and indeed the local economy is now beginning to look attractive. The introduction of various financial incentives for first-time buyers, no matter how short term these may be, is also feeding into this regional variation and many leading property experts believe that talk of a house price bubble is well wide of the mark.
In many ways the financial press can, and on many occasions do, lead the way for investor sentiment especially across regional markets. The London market is to a greater extent at the beck and call of international investors who continue to pour money into the London property as a form of hedge against European issues and problems in the US. There will come a time when ongoing overseas investment into the London property market will slow but at the moment there is very little sign of this.
In some of the more sought-after areas of London we are seeing property yields under 3% with expectations that they could move towards 2% in the short term. When you bear in mind inflation, currently at 2.7%, this does prompt the question as to whether there is more value for money in some of the U.K.’s regional property markets. It is interesting to see some of the larger property investment funds looking towards student accommodation in “university cities” as a form of guaranteed income and a way in which they can take advantage of the strong rental market.
If, as many expect, the UK economic recovery continues it is likely that we will see further improvement in the central London property market and perhaps greater relative improvement in regional property market.