Is the Northern Powerhouse overtaking London?

In post-Brexit times almost everything is being redefined as we come to terms with the economic consequences of our decision to leave Europe.

Is the Northern Powerhouse overtaking London?

In post-Brexit times almost everything is being redefined as we come to terms with the economic consequences of our decision to leave Europe. The market appears to be in the midst of a large readjustment and commercial property is currently gripped by anxiety. Unsurprisingly residential property has remained, by and large, unaffected by recent developments. Prices have shored up and demand is unlikely to decrease but rather, we can expect increases.

London has been facing issues for some time in its property market and some experts have been advising of a bubble which may be about to burst. Certainly there seems to be a consensus that prices in the capital have peaked and aren’t expected to go much higher anytime soon. The figures also back up the idea that the area’s property market is slowing as it appears to be cooling down with research revealing that up to 40pc of houses for sale in some areas of the capital have had to cut their asking prices since coming to market.

Earl’s Court, in West London, and Surbiton, to the south-west, had the highest proportion of price cuts in the capital, with 40pc and 38pc of properties for sale in the respective regions reduced in value. The price cuts are largely concentrated in the high end of the market, in the centre, west and south-west of the city. One-third of properties currently for sale in the borough of Kensington and Chelsea have had to cut their asking prices by an average 8pc, according to property analysis.Against this backdrop of uncertainty new figures have been released that show how low the disposable income of Londoners has dropped. Although the average salary in the capital is markedly higher than anywhere else in the UK the cost of living is also notably high. Relative comparisons between London and the likes of Leeds, Manchester and Liverpool show much higher disposable incomes in the north. As demand increases in London and prices remain extremely high whilst wages remain fairly stagnant, we can see a trend of the property marketing reflecting a slowing sector. Yields are mirroring these trends as profits are being squeezed across all brackets.

Manchester though tells a completely different story of a city on a skyward trajectory. It’s a typical story of proposed Northern Powerhouse cities like Manchester, Leeds and Liverpool where only twenty years ago poverty was increasing and opportunity was limited. Post-industrial areas had often felt left behind by a South-East that was flourishing under capitalism. As an example only 400 people lived in Manchester city centre in 1996, at the time of the bombing by the IRA of the Arndale shopping centre. Now the city centre is home to 20,000 people. Cranes now tower across the city’s centre as new office and residential buildings spring from former industrial soil. Manchester attracted £2.3bn of commercial property investment in 2014 and 2015, more than any other English city outside London. Next was Liverpool with £979m, followed by Leeds with £958m and Newcastle with £842m. The cities are expected to benefit further from rising prices in London, which are pushing property investors to look further afield, some of them for the first time. More new homes were started in Leeds in 2015 than at any point in the past nine years, according to Deloitte, the professional services firm. The population of Liverpool’s city centre grew in the past decade for the first time since the Second World War.

As property continues as a safe haven for investors looking for robust returns the evidence is mounting that a move to the north of country is a better long term strategy. Capital appreciation, yields and overall health of industry is growing in The Northern Powerhouse and the stats suggest that London is struggling to keep pace.

Intus Lettings vertical - April 2019

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