Property is usually a medium- to long-term investment, which is why property investors are often more interested in forecasts for the next five years and beyond than in forecasts for the immediate future. This New Year, however, the outlook for the forthcoming five years is essentially a continuation of the last couple of years.
London and the Thames Valley will continue to slow but not stop
While the 2008 financial crisis was a painful experience for many people (and not just those directly involved in finance), one of its ironies was that the London property market recovered from it more quickly than a lot of people might have expected at the time. Indeed, taking the last 10 years as a whole, London has seen quite spectacular house price growth of 72%.
It does, however, have to be remembered that not only is this taken against a relatively low base (due the events of 2008), it also reflects the massive investment in certain parts of London (especially east London) due to the 2012 Olympics and some major transport projects including Crossrail, the forthcoming arrival of which has done wonders for certain parts of London.
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In short, the London property market has benefited greatly from certain unique circumstances, especially the 2012 Olympics, which are not likely to be repeated any time soon. It may or may not find Brexit a major stumbling block. Going on London’s history, the likeliest scenario is that Brexit will continue to cause some nervousness until people know where they stand and then, whatever the ultimate outcome of the Brexit negotiations, London will find a way to deal with it and, over the long term, will “keep calm and carry on”. Over the short term, however, the London housing market is (over)due a slowdown and when it does pick up again it is forecast to grow at a much slower pace, probably falling just short of 5% growth over five years.
Northern England will continue to power ahead
It seems hard to believe now, but while pre-Olympic investment was boosting London’s economy, the north of England was still struggling to pull itself out of long-term economic difficulties. The north/south divide was becoming too obvious and contentious to ignore and so the Northern Powerhouse initiative was set up to address it and has delivered impressive results.
The north of England already had the benefit of a number of excellent universities, which could provide a high quality education at an overall cost which was much lower than anything students could reasonably expect to pay in the south east. Its problem was retaining this talent and attracting newcomers. By improving employment opportunities in the area, the Northern Powerhouse initiative stopped the brain drain and began the process of setting up the north of England as a real competitor to the south.
As a result, northern England has experience significant demand for housing (both to buy and to rent) with corresponding house price growth and excellent rental yields. As the north west was coming off a very low base, even compared to London when it was struggling, affordability is still very reasonable and looks set to remain that way even though much more growth is predicted. In fact, some analysts believe that the north of England could achieve house price growth of over 20% in the next five years.
Author Bio
Indlu are hybrid estate agents in Manchester, with many years of experience in the Manchester property market. Indlu offer a no sale, no fee service and a free online property valuation.
