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£1 billion government backing boosts northern hotspot property markets for 2014 and beyond
December 12, 2013Article by Ray Withers
We’re just back from visiting our latest UK property hotspots – Liverpool, which was recently named as a top buy-to-let location in the Daily Telegraph; and Bradford, which is a boom town since it was selected as the site of the new £260 million Westfield shopping centre.
I’m pleased to report these prestigious developments are as great as they looked … and they are about to get even better.
Excellent forecasts for 2014 and beyond
We and the industry press are all in agreement that 2014 is set to be an excellent year for the buy-to-let property market. Indices vary, but prices on average have risen by 3.5% to 6% this year and next year’s forecasts follow the same theme. While Strutt & Parker cautiously expects growth to be “sensitive to prevailing political press and expectations”, the National Institute of Economic and Social Research (NIESR) estimates 5%, Hamptons expects 6% and Savills 6.5%.
The five year forecasts are also looking good, with experts forecasting 20% to 30% growth (depending on the area). Sales wise, Hamptons predicts a 9% increase in 2014, while Savills expects 15%.
The National Association of Estate Agents (NAEA) forecasts a better balance between supply and demand and a more fluid market, with sustainable recovery and no bubble (which means we aren’t expecting a crash either).
Mark Hayward, NAEA managing director, told us: “We end this year with market conditions very much improved, thanks to a reviving UK economy and various successful government schemes; and this buoyancy looks set to continue well into 2014. But fears of a housing bubble are misplaced.”
£1 billion government investment to help revive housing market
UK Chancellor George Osborne’s autumn statement revealed money will be unlocked to boost housing across the country, particularly in the north. The £1 billion, six year programme is being launched to contribute towards the need for housing stock and also drive jobs in the struggling construction industry.
Despite a positive reaction from the industry, experts believe more needs to be done and experts agree continued private investment will be needed on a far greater scale as well. Many were also disappointed the much-needed improvements to Stamp Duty were not addressed.
News that overseas investors pay capital gains tax (28%) on the profit they make when they sell their UK properties, went down well with cash-strapped Brits who are already paying CGT. But our international investors need not worry too much as we are still lower than other key investor markets such as New York and Paris, where taxes can be as high as 35% to 50%.
Northern regions PRS most set to benefit
Northern markets are most set to benefit from the £1 billion investment drive, which will create 250,000 new homes by unlocking stalled housing projects and encouraging growth. These include Leeds, Manchester, Liverpool and Bradford, i.e. cities already in regeneration but requiring an additional boost to their housing and job markets to assist the speed of recovery.
However, home ownership is still out of reach for many people – especially with the outdated Stamp Duty system and ongoing escalation of prices. Not to mention the stock shortage. There were 4.3 million households in the private rented sector (PRS) in 2011 and this rental trend continues, with Savills forecasting a rise of another one million PRS homes in the next five years.
Renting, once seen as a temporary housing solution, is becoming a much longer term option for the UK’s ‘generation rent’. The majority of private tenants are aged between 25 and 34, but the fastest growing group is now in the 25 to 44 bracket, a quarter of which are made up of young families.
Hotspot investments selling fast
So, what does this all mean for investors? Well, it certainly looks like 2014 is ‘the’ year to invest in UK hotspot cities and especially those set to receive the government grants. The five year forecasts for both price growth and the private rented sector are looking good too. Plus, our international investors need not worry about CGT as the best strategy is to hold for rental income throughout this upwards cycle, as opposed to selling for a fast flip.
Get in touch on +44 1865 202 700 to find out more about our hotspot investments, including a prestigious development guaranteeing yields of 8.5% (gross) for investments from £75,000; and luxury city centre apartments delivering returns of 9% on investments from just £50,000 and offering 50% developer finance. We’re already inundated with early bird interest, so act quickly to avoid disappointment.