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Understanding the UK property market’s curve and how to get ahead of it
July 7, 2016Article by Ray Withers
One of the most important aspects of running a specialist property investment company is understanding the life cycles of property markets. Being able to see what’s coming and to get ahead of the curve is what enables companies and indeed investors, to achieve success and longevity. We’ve been doing this for 12 years now at Property Frontiers and in the spirit of sharing our knowledge I wanted to provide some insights into how individual investors can see what’s on the horizon too.
Let’s look at Stockport
Let’s look at Stockport as an example. The Greater Manchester town of Stockport is currently enjoying the ripple effect of Manchester’s economic success. While Manchester’s property market is advanced on its growth curve, Stockport, which lies just seven miles to the south east, is at the start of a growth cycle.
A “generally prosperous borough with a highly skilled workforce,” according to the local Metropolitan Borough Council, Stockport is expected to enjoy an increase in demand for office space of 34,300 sq m between 2013 and 2018, and a further increase of 30,700 sq m between 2018 and 2023. Rapid and sustained growth has been forecast, with demand for high quality, town centre rental accommodation tipped to increase hand in hand with the demand for commercial space.
Properties and prices
Seven miles can make a big difference. While properties in Manchester city centre command an average price per square foot of around £500, this drops to between £170 and £200 per square foot in Stockport. Low prices, combined with forecasts for rapid economic improvement and population growth, are factors that indicate an area’s property market is at the start of the curve and thus worth investigating in more detail.
While Manchester has enjoyed years of investment, Stockport’s inward investment seems to be on the brink of bigger things. There are plans to retain the town as a key station on the west coast mainline, with both phases of HS2 set to bring infrastructure improvements and economic advancement to the area. In addition the £145 million Stockport Exchange commercial development, £900 million of town centre improvement works and plans for 5,000 new jobs are set to see demand for central Stockport properties soar.
The time to act
Understanding property life cycles is the first stage of successful property investment. Acting on them is what comes next. Take Archer House in Stockport. The commercial to residential conversion, which is exclusively available to Property Frontiers’ clients is available from £67,500 (cash from £22,000 on 1 bedroom units), offering NET yields of up to 6.1% (ROCE of over 20%). Ten prime units are available on the top floor, with premium views across the town (the building is located in the heart of Stockport’s central business district), and are priced at least 10% below current market value.
Getting ahead of a property market’s curve and acting quickly is the time that some very lucrative returns can be made. It’s the chance to capitalise on a rising star. And right now, Stockport’s star is rising fast.