The north of England continues to dominate the property investment sphere, and the outlook is for this to continue over the coming years.
Both rental yields and capital appreciation prospects are the highest on average in the north of England, according to the latest figures from Sourced Franchise, making this part of the country the most promising prospect for many property investors.
This north-south divide has become increasingly apparent in recent years in the housing market, but not in the traditional sense; house prices have skyrocketed in parts of London and the south-east, ultimately pushing many buyers to seek better value property investment options elsewhere.
This has coincided with greater levels of investment and regeneration in the north, which has had the effect of pulling greater numbers of tenants, businesses and ultimately investors towards cities such as Manchester, Birmingham and Liverpool.
Affordability with house price gains
Many parts of the north of England continue to enjoy property prices below the national average, which is one factor enticing those looking at property investment to the area. However, demand has also boosted prices, leading to greater levels of capital appreciation.
According to Sourced Franchise, the average house price in the north as a region increased from £205,875 in May 2022 to £211,392 in May 2023, which is a rise of 2.7% annually. In the south, prices increased by just 0.8% in the same period, from £385,719 to £388,917.
The standout regions for property investment capital appreciation were the north east with 4% house price growth, the East Midlands (3.4%), the north west (2.7%) and the West Midlands (2.2%). In the south, the south east saw the highest house price gains of 1.5% for the year.
Chris Kirkwood, director at Sourced Franchise, commented: “There has long been a disparity between England’s northern and southern housing markets. But historically, the common narrative has been a booming south and a struggling north.
“Our latest analysis proves that when it comes to property investment, it simply isn’t that black and white. The north is now outperforming the south on multiple fronts and is, in many ways, now the driving force of positive growth.”
Property investment hotspots
A growing number of investors have been focusing on the yields of their property investment over capital appreciation, in part due to increasing borrowing costs coupled with the house price growth slowdown. The north of England offers the strongest yields in the country, according to Sourced Franchise.
The average rental yield across the north of England is currently 4.7%, compared with the south’s 4.2% average yield. Of course, this is a very generalised figure, and yields can vary drastically from location to location, and based on property type.
In the north west, the average buy-to-let brings in rental yields of 5.5%, followed by Yorkshire and the Humber with 4.9%, marking these areas out as property investment hotspots.
Rental values themselves are more of a mixed bag when looking at the differences between the north and the south of the country. Annually, rents have increased more in the south (at 9.5%) than in the north (8.7%) over the past year.
Delving deeper into individual locations, the top five regions are London with the strongest growth of 12.5%, followed by the West Midlands (10.8%), south east (9.7%), north west (9.5%), and east of England (8.9%).
Accessible markets up north
As Kirkwood points out, property investment prospects are continuing to improve in the north, and the area now offers “much better opportunities”.
“Not only are prices significantly more affordable than the south, making it the more accessible market, but returns are also markedly stronger. Much of this is being driven by a shift of national focus away from London and towards cities such as Birmingham, Manchester, Liverpool, and Newcastle.
“We’re seeing major businesses move north from the capital, including the likes of Channel 4 and the BBC, and we’re also seeing young families escape the claustrophobic prices in the south for the more accessible markets up north.
“We fully expect this pattern of northern dominance to continue into the foreseeable future.”
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