The UK’s second cities have plenty of room for growth for investors

The UK’s second cities have plenty of room for growth for investors

As London house prices peak and plateau, the market difference between the property markets of the capital and the country’s other major cities remains huge, presenting a wealth of opportunities for investors.

Whether the UK’s second city is Birmingham or Manchester is a long-running debate. While Birmingham has been widely accepted as the country’s most populated city after London for a number of years, a recent poll showed that more people thought of Manchester as holding the “second city” mantle.

In the UK, the London property market has soared well above the levels seen in the rest of the country, with house prices currently estimated to be £471,986 in the capital, according to data from the Office for National Statistics (ONS). By contrast, property prices in Birmingham are an average £154,600 according to Hometrack, which is a huge difference of around 101%.

Likewise, average property prices in Manchester are around £158,000 according to research from Hometrack, which is a price difference of around 99% between there and London.

As the London property market continues to slow down, investors looking elsewhere in the country will see considerably lower price points, and vastly more room for property prices to rise as they begin to gain on the capital.

How the UK compares to Europe

Compared to the rest of Europe, the scope for growth for second cities to catch up with the capital in terms of house price performance is significant in the UK. For example, in France, figures from LPI-Se Loger set the average price per square metre in the capital Paris at around €9,000 (£7,880), while in the country’s second largest city Lyon, prices are roughly €3,700 (£3,240) per square metre. This is a percentage difference of around 83%.

In Germany, the tables are completely reversed between the capital and elsewhere. While in the capital, Berlin, properties fetch an average of €4,300 (£3,765) per square metre, according to Deutsche Bank research, the second largest city Munich actually has average property values of around €8,600 (£7,530) per square metre, double that of the capital.

Similarly, in Spain‘s capital Madrid, properties are worth an average of €2,601 (£2,278) per square metre while in the metropolitan city of Barcelona, prices are higher at around €3,129 (£2,740) per square metre.

With house prices in Birmingham and Manchester expected to rise by as much as 30% in some areas over the next few years, as the London property market slows down and even goes into reverse in certain regions, investors looking for the best returns are increasingly looking at the country’s “second cities” where there is more room for growth and higher yields to be made.

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