Getting the location right is often the first step towards a successful property investment, whether your focus is on monthly income or long-term gains.
Over recent months, many property investors have continued to look past the gloomy headlines of house price stagnation across the UK, as the long-term prospects of the property market continue to appeal. Focusing on strong rental returns and yields at the moment has become particularly important, and these metrics have remained positive.
However, for those that do look more closely at the house price indices being released, it is clear that location plays a huge role in the performance of individual areas. This is why it is important to keep in mind the particular pockets of the UK that are ripe for investment, rather than regarding the UK housing market as a whole entity.
While some investors may opt for a location close to where they live, or a tried and tested area that has performed well for them for a number of years, there are other factors to consider too. Places with big plans for regeneration or transport improvements, areas that are close to universities, and locations that have recently seen a boost in tenant demand and rental pricing can all offer opportunities.
House price data: location-specific
One index recently released by Halifax has revealed some fairly significant variations on house price performance in terms of location, demonstrating how vastly different the reactions of various housing market “pockets” can be to external factors. This is despite the UK overall experiencing a year-on-year fall of -3.2%.
For example, Powys in Wales has seen a huge 17.4% surge in house prices over the same time period, making it the strongest-performing location in the UK. The second strongest area for house price gains was East Lindsey in the East Midlands with a 13.3% uplift, followed by Moray in Scotland (10.7%).
Specific locations within the north west, the north east, eastern England and London were all also highlighted in the top 10, proving that more general trends can be off the mark compared with when you look more specifically at individual areas.
Similarly, the ONS house price index which was also released this week (15th November) revealed a mixed picture in house price performance across the UK’s regions – albeit this data also included a generalisation of very large areas rather than an in-depth look at each small location.
Using sold prices in the 12 months to September, it revealed an overall nominal drop in value of -0.1% on an annual basis. Yet in the north east, prices rose by an average 1.6%, significantly above the UK average, while the north west also outperformed with a house price increase of 0.6%, followed by the West Midlands (0.5%).
The importance of research
These findings demonstrate how crucial it is for serious property investors to conduct thorough research into a particular location before making a purchase, as these are the investments that are likely to buck the trend and outperform the areas that are lagging behind.
Another important point to note is that lower transaction numbers can actually distort the data, which is why investors should look at this aspect of the market as well as pricing, and consider trends over the long term rather than month-by-month.
This view is reiterated by Tom Bill, head of UK residential research at Knight Frank: “The UK is made up of tens of thousands of individual housing markets, which means price growth can also diverge between two areas in the same local authority.
“Broadly speaking, more affordable parts of the country are gradually closing the gap with London, where affordability is at its most stretched. The gap will get narrower without closing as buyers look beyond the capital for better value.
“The more important point for anyone interpreting house prices at the moment, is that fewer transactions can distort the data. The underlying health of the housing market is not necessarily gauged by what is happening to house prices but rather transaction volumes, which are down by more than a fifth.”
BuyAssociation is a property investment company with more than 18 years of experience working within the UK property market. We specialise in helping property investors find their ideal investment in some of the best-performing areas of the country. Browse our current and past projects here, or get in touch for more information.