Did the North/South Property Divide Close Overnight?
It is one of the most talked about issues within property over the last five years, but is the divide between northern and southern property prices at its end?
According to a report published by EY, London’s capital is no longer growing at a much faster pace than the rest of the UK. London was predicted to outperform all other UK regions, with an increase in its gross value to the economy of 2.1% until 2021), but over the past three years London has seen a decrease from its usual rate of 2.5% growth. Although London’s economy remains strong, towards the end of last year, Chancellor Philip Hammond presented “proof of the underlying strength in our economy”, we’ve set out to examine whether this strength is also being reflected in the Northern regions.
Looking back at the past 12 months, prices in the city of Manchester have increased by 6.5%, soaring over the UK national average of 3.5%. The Office for National Statistics reported that prices in the East and West Midlands are growing by 6% a year, “outstripping all other parts of the country.” Places like Scotland are also seeing prices rise by 5.8%, as well as Yorkshire & Humber by 2.6% and Wales by 5.8%; all signs point towards the property gap closing. But why now?
Research by Deloitte brought to light the fact there has been a huge amount of activity around cities such as Birmingham and Manchester, which in turn is boosting housing prices. More and more people are being drawn to these cities due to even faster, more efficient commutes to work; this is such a significant factor as buying choices can be distinctly tracked around mainline train stations. The completion of HS2 in 2026 will continue to drive buyers to regions further away from London, as a commute from Birmingham to London will stand at just 45 minutes (even commuters who live and work in the capital can face longer journey times than that).
Additionally, the British government and large multinational companies have set a commercial focus on the Midlands, continuing to boost its economy and generate employment opportunities. Take HSBC for example, they have moved their UK Head Office to Birmingham, and Channel 4 shook the nation towards the end of last year by announcing Leeds as its new HQ in a move to “boost the way it reflects like outside of London.”
Add to this that Birmingham is preparing for the Commonwealth Games in 2022, and the results speak for themselves; 4,000 new residential units are under construction, student bed spaces are up one third since last year, and there have been seventeen completed schemes since Deloitte’s last survey. Manchester tells a similar story; over 11,000 residential units are under construction (up 60% since previous year) and construction has commenced on 32 schemes.
With numerous, large-scale regeneration schemes being planned and in execution in the North, namely in Manchester and Birmingham, it’s unsurprising that the appeal of these cities has drawn people to them – and with this regeneration not just set to continue but to escalate, likewise more and more people will be pulled towards Northern cities.
There is however, one critical factor which has the potential to turn off the current spotlight on the North: Brexit. A Think Tank recently revealed that Brexit’s hanging in the balance could be holding back the Northern Powerhouse due to the government deprioritising its progress and allocating assets elsewhere. The report author, Luke Raikes, fed back “the Government is so consumed by Westminster’s Brexit chaos that it has deprioritised the Northern Powerhouse agenda at the very time it is needed most. This cannot continue.” With such progress achieved by the North, could a lack of momentum, due to resources being dedicated to Brexit, have the ability to halt it in its tracks?
Luckily, according to experts, the trend of the Northern Powerhouse is set to continue. Despite Brexit, the impact of this divide has been undoubtable; the great disparity in prices between a house at opposite ends of the country has been one of the biggest drivers for internal migration for the past five years, if not longer. Relocations have doubled since 2010 as buyers have been drawn to the North where you were, until recently, guaranteed more for your money. Now, depending on the outcome of Brexit and its impacts, the North will depolarise the focus of attention off London and spread people and property ownership among regional areas of the country. LPC Living, a property developer, has predicted that prices will continue to rise in the North West, by a staggering 18% by 2022.