What will plans to invest in the economic growth of the north of England mean for the performance of the buy-to-let market in key cities? Sunday Investor
There’s forever been a north-south divide in the UK.
London and the south-east has benefited from the vast levels of investment flowing into the capital, whilst other regions of the country grow at a much slower pace.
But things are changing. More large cities outside London are thriving, and their respective property markets are seeing a flurry of activity.
In the north of England, this looks set to continue with significant levels of investment thanks in part to the ‘northern powerhouse’ programme.
What is it?
Creating a northern powerhouse is something that Chancellor George Osborne first outlined in his Autumn Statement last December, and reaffirmed in his final Budget speech in March before the General Election.
It is a proposal to drive the economic growth of the north of England. Focusing on key cities such as Manchester, Liverpool, Sheffield and Leeds, it aims to address the economic imbalance between London and the south east and the rest of the UK. Unlike countries such as Germany where the gap between Berlin and other large cities across the country is relatively small, London produces double the wealth per person than Edinburgh, its nearest competitor.
This is what Mr Osborne said in March:
“Over the last year, the north grew faster than the south. We are seeing a truly national recovery. And where is employment growing fastest? The North West.
“And which county has created more jobs than the whole of France? The great county of Yorkshire.
“For our ambition for a truly national recovery is not limited to building a northern powerhouse. We back in full the long-term economic plans we have for every region.”
How will it work?
The creation of enterprise zones with favourable tax conditions, coupled with the development of a HS3 trans-Pennine rail link connecting Liverpool and Hull are intended to drive local job markets and business investment, whilst there are a number of projects planned in science and innovation industries.
But perhaps the biggest plan is to give major northern cities more power through City Deals. Greater Manchester, for example, is the first city outside of London to now be able to elect its own mayor and have powers over what it spends in areas such as transport and housing.
So what will this mean for the northern buy-to-let market?
It means that investing in real estate in the north of England will continue to be one of the biggest opportunities for both domestic and overseas property investors.
The growing economic confidence amongst property owners in the region is just one of the reasons why property prices in some of the biggest cities grew faster in the first quarter of 2015 than those in central London; Manchester, Sheffield and Newcastle saw the highest rates of growth than anywhere else outside of the M25.
Ultimately, driving the economic landscape of these cities would create more jobs and see more businesses and organisations opening offices, placing an emphasis on quality rental property to accommodate this growing number of people.
Greater Manchester, for example, (which is expected to see investment of £7 billion under the northern powerhouse plans) was named as “the largest functional economic area outside London” by investment agency MIDAS, whilst HSBC labelled it as the ‘UK’s second city for investment’ – 65 of the FTSE 100 companies now have offices in the region. Prices in Manchester are predicted to rise by at least 22.2% in the next three years thanks to a critical undersupply of property, a growing population and continued business investment.