Find out what’s happening in the property investment arena both in the UK and internationally
2017 property hotspot projections see Birmingham and Liverpool firmly in investors’ sights
October 3, 2016Article by Chelsea Battle
2017 will mark a decade since the confidence in the UK housing market – along with prices – began to crash so spectacularly, as the ripples of the US sub-prime mortgage debacle began to spread around the world. Ten years on from the events that triggered the crash, the market has made a strong recovery in many areas, with cities like London, Cambridge and Oxford now showing prices almost 60% higher than on the eve of the crash, according to data from Hometrack.
Property hotspots for 2017
But not all cities have seen prices rocket past those of 2007, as Ray Withers, CEO of Property Frontiers, explains,
“There has been incredible variety across the UK in terms of house prices rises in recent years and in the strength of recovery since prices started to tumble a decade ago. London and the South East have enjoyed some of the fastest and steepest price increases, but cities in the North and the Midlands were slower to follow suit. They’re catching up now though, with cities like Birmingham providing small bubbles to serve buyers looking for stable growth well.
“Cities like Liverpool, meanwhile, will provide the best bargains for investors looking for areas where prices are still likely to go up quickly. The safest way to determine whether those bargains are risky or not is to take the time to examine the economic fundamentals and local trends those cities are experiencing.”
According to Hometrack’s figures, house prices in Birmingham are less than 10% higher than their 2007 peak, while in Liverpool they remain almost 10% below that peak. Many industry experts such as Withers have highlighted the cities’ potential as hotspots in 2017. Both have major regeneration work underway and ambitious future plans. Birmingham is set to benefit massively from the HS2 railway network. Liverpool may also benefit, if the powers that be take up the city’s offer to pay £2 billion towards the cost of the network in return for a 20 mile track extension that would see Liverpool become part of HS2.
The Brexit effect
While the impact of the Brexit vote in June is still unfolding, there is growing evidence that the housing market is reacting robustly to the political uncertainty. The UK has a massive housing shortage and the market fundamentals of that situation remain the same, regardless of whether or not the UK is part of the EU.
While mortgage approvals fell in August to the lowest rate for two years and house price growth moderated slightly during September, figures from Nationwide show that prices still rose by 5.3% annually and by 0.3% over the month. In addition, the Royal Institute of Chartered Surveyors has found that the decline in prospective buyers looking for a home has “greatly reduced pace,” suggesting that demand will continue to race ahead of supply, particularly in light of the subdued number of properties coming to market.
Desperate need for new homes
The UK’s need for new homes remains far ahead of the rate at which it is building them. 225,000 new homes are needed every year to meet demand, but government data shows that just 139,000 houses were completed in England in the past year. Property Frontiers’ Ray Withers comments,
“The UK is in desperate need for new homes, particularly in sought after urban areas. City centre living is more popular than ever, with professionals in cities like Liverpool and Birmingham wanting to live at the heart of the action. We’ve found that developments like Parker Street Residences in Liverpool and The Divine Collection in Birmingham’s Digbeth are precisely the kind of homes that professionals are seeking, but the number of those homes available is lagging woefully behind the number that’s needed. Such an imbalance between supply and demand creates a fantastic opportunity for investors and of course excellent potential in terms of price rises, making Liverpool and Birmingham both cities to watch closely in terms of property hotspots for 2017.
“The other factor to consider is rental prices. Unfortunately for the renting population, even in cities where house prices are relatively cheap, renting can still be expensive. These lower-priced cities where rental yields are surprisingly impressive, like Liverpool, represent the best deals for landlords looking ahead to 2017.”