London used to be the place where the property market forged ahead of the rest of the UK. Now, however, while prices in the capital are still high, there is very little sign of house-price growth. The north of England, however, is experiencing a very buoyant housing market with Manchester leading the field for house-price growth.
In the north, prices are not only up, but up in real terms
In the 12 months to June 2018, Manchester saw house-price growth of 7.4% with Liverpool hot on its heels at 7.2%. Birmingham and Leicester came in third and fourth place at 6.8% and 6.5%. This contrasts sharply with London, where house-price growth has been a negligible 0.7% which is below the 2.4% rate of consumer price inflation, meaning that prices have actually fallen in real terms. London is not the only southern city where this has been the case, Oxford, Cambridge and Southampton are all in a similar situation.
Affordability still favours the north
For all the rapid growth in the Manchester property market, the fact still remains that an average property in Manchester costs £163,300 whereas an average property in London costs £491,200. Traditionally, this gap could be explained, if not justified, by the differences in average salaries available in both cities and to a certain extent this is still the case, however the “Northern Powerhouse” has been powering ahead bringing employment opportunities with it.
As a result, today’s generation of workers are not necessarily under the same degree of pressure to head “down south” to further their career, indeed in some cases it may well be that the opposite is true with young professionals starting to head out of London to where property is much more affordable relative to their wages.
Better affordability makes it easier to get (and service) mortgages
In the residential property market, the majority of buyers need mortgages and these days, getting a mortgage is no longer about multiples of income, it’s about affordability and that includes ensuring that the potential buyer has a decent chance of being able to service their mortgage if interest rates (continue to) rise.
While lower house prices do not necessarily equate to greater affordability, when you combine lower house prices with decent employment opportunities, you are very likely to get a situation in which people are both able and willing to buy property, which, of course, is the ideal basis for a flourishing property market and house-price growth.
The key point about house-price growth in Manchester (and the north in general) is that is has come about in tandem with economic growth and is therefore the sort of growth which is likely to be healthy and sustainable. This should reassure those who might otherwise have been concerned that this kind of house-price growth was simply going to lead to a sharp correction later, possibly as the London market recovers. In actual fact, for all the uncertainty around Brexit, Manchester’s diversified local economy and great transport connections and digital infrastructure, mean that it has a very positive outlook for the foreseeable future.
For more information on buy-to-let investment in Manchester, please contact Hopwood House.