Buy-to-let investors are flocking to the North, attracted by low entry prices and high yields in places such as Manchester, Liverpool and York
As Chancellor in 2014, George Osborne announced that a “Northern powerhouse” – his plan to combine the might of cities in the North of England and their 15 million population – had the potential to “take on the world”.
Much has changed in politics since then, but the concept of a Northern powerhouse is becoming ever more real.
Connectivity is key to bringing the cities closer together through planned major transport upgrades, including Northern Powerhouse Rail (also known as HS3) and the world’s longest road tunnel, beneath the Pennines, that would cut journey times between Manchester and Sheffield.
Another focus is bridging the North-South economic gap by building up the North’s tech, science, cultural and service sectors. Leeds has become a burgeoning digital tech hub and Manchester is ploughing £1bn into its infrastructure.
Buy-to-let in the Northern powerhouse
So what does this all mean for buy-to-let investors? Traditionally, many come from the South, attracted by low entry prices and high yields (though often modest capital growth).
In June, Liverpool was named the best city for buy-to-let yields by mortgage broker Private Finance, although Sheffield rates highest according to Numbeo, showing 12.1pc yields in the city centre.
There is also scope for big capital gains in some areas. “York is one of the strongest areas for buy-to-let from a capital growth perspective,” according to David Sinclair, lettings manager at Carter Jonas in York.
“City centre apartments will always be popular, especially if they include parking. Rentals tailored to young professional couples and upmarket flat shares are in greatest demand.”
But it is Salford that is the shining star, according to the property website home.co.uk, with average rental yields of 5.4pc but a “real yield” (rental yield plus capital appreciation) of 32.3pc.
The “university effect” is thought to be a key contributor to Salford’s success; as in many northern cities, Manchester’s student population provides an obvious market for investors.
Millennials, who want better-quality housing and a better work-life balance than Manchester city centre can offer, is making suburban Salford “the place to watch”, says Jonathan Stephens, managing director of Surrenden Invest.
“It’s seen as outside the core, but it provides investors with all the amenities and quality of prime central but at a price point of up to 30pc lower than developments on the other side of the river,” he adds.
Best buys in the North
However, the Northern powerhouse initiative is having its most positive effect in Liverpool and Manchester, according to Rob Bence, co-founder of The Property Hub – and student property is booming in both.
“Many of the new developments are PRS [private rented sector] only, which means they are not available to buy as an owner-occupier, but investors can put their money into the development. These developments play on the benefits that renting can offer, such as a prime city centre location, gyms and concierges,” says Mr Bence.
There are two simple reasons why Liverpool and Manchester are “good buys”, says Richard Forman, head of sales and marketing at Delph Property Group – “strong local economy and a housing shortage”.
He says: “Manchester has become a media hub second only to London, and Liverpool’s new superport is creating new opportunities in logistics and shipping. The universities are feeding the jobs boom, and demand for housing is having a knock-on effect on rents, which are at record levels.
“Young professionals are a significant demographic and there is clearly an appetite for stand-out apartments that are centrally located with great shops, restaurants and a vibrant evening economy on the doorstep,” Mr Forman says.
An oversupply of new-build flats left northern cities exposed when the economy crashed in 2007. This time round, with more build-to-let, a healthy mix of owner-occupiers and investors in schemes, and big job creation by major companies, the powerhouses of the North look to be on a much surer footing.