With the benefit of hindsight we always know, with painful clarity, which investments we should have bought and which we should have sold. The signs were all there, we just missed them.
At this point in time, the signs all point to investment in the Northern Powerhouse, particularly in its housing market and investors who miss this opportunity will have plenty of opportunity to regret it later, while they watch those who made the most of it reap the benefits.
‘Young professionals and students mean high demand for buy-to-let’
This one sentence summarises the core appeal of the Northern Powerhouse - at least from a buy-to-let perspective. Not only are young professionals staying in the Northern Powerhouse, as opposed to heading down south to further their careers, but they are actually coming to it to build careers or to start businesses.
Regardless of whether they want to rent or buy, these young adults will find the north far more affordable than the Thames Valley area and between high-speed broadband and excellent transport infrastructure, they can easily connect with just about anywhere in the world.
Similar comments apply to the student population. The universities and analogous institutions, such as the Liverpool Institute for the Performing Arts, offer an education to at least the same sort of standard as southern universities and do so from a location where the cost of living is much lower.
Lower rents for tenants, higher yields for landlords
Although house prices in the Northern Powerhouse area are definitely climbing, they are coming off a very low base, at least compared to the south east of England, and hence it is possible for landlords to tempt tenants with low rents - compared to London and its vicinity - and still achieve a healthy rental yield for themselves, plus there is still time to benefit from healthy capital appreciation. In fact, where you choose to invest in the north east may depend on whether your priority is immediate income, long-term capital growth or a mixture of both.
Liverpool, Manchester and Sheffield are often cited as the places to go for rental yield, whereas York is a favourite with investors who are mainly interested in capital gains and Salford is known for offering a mixture of both.
In fact, Salford is still a bit of a “hidden gem” in the local market probably due to its proximity to Manchester and the assumption that most young professionals will prefer to live in the heart of the city. While there is some truth in it, there are still quite a few Millennials who prefer the more tranquil environment of Salford, hence its attractiveness as an investment location.
The importance of sustainable development
Some investors may still be wary of putting their money into the north of England, remembering what happened after the last crash (in 2007/2008). There are several differences between then and now, of which arguably the key one is that 10 years ago, there was actually an oversupply of housing, particularly new-build flats, compared to the size of the population. At this point in time there is a supply-side shortage combined with a vibrant and very sustainable local economy.
Mark Burns is the managing director of Hopwood House.