While London has always been a firm favourite for Middle East investors, we have witnessed a behavioural shift as investors have been actively exploring cities further north of the country, which offer both more affordable prices and a consistently strong financial performance.
When researching potential markets, we apply the acronym PIE, which stands for population growth, infrastructure and economy. When looking to invest in a property it is important to consider the population of a location because as when population grows so does demand for dwellings, driving property prices upward. Secondly, potential investors should review the governments approach to regeneration and infrastructure as these initiatives will increase the appeal of a location, increasing demand and raising house prices. Finally, a stable and robust economy with diverse industries and growing employment levels makes for a promising investment opportunity because it reflects continued long-term growth.
We have identified three cities which we believe will continue to grow and offer a profitable investment.
Manchester is a key investment opportunity for UAE residents as properties are selling rapidly and house prices are significantly increasing. For example, average house prices in Manchester grew by 6.6 per cent from November 2016 to November 2017, outperforming the UK average of 4.7 per cent. The city also has the highest gross value added (GVA) and development of the Northern Powerhouse’s six cities.
Rental rates are significantly increasing, with a 17 per cent rental growth forecast last year. This is partly due to young professionals, new graduates and students whose demand for housing, particularly new-build housing and city-centre dwelling, is putting an upward pressure on rents. The rental stock has increased in an attempt to meet this demand, with the ratio of rental and sale properties on offer now equal after the rental market share grew by 10 per cent last year.
Liverpool’s economy is currently worth £29.5 billion (Dh139.5 billion) and is developing at a faster pace than the rest of the UK. The city is part of the UK’s second-largest regional economy and is home to 252,000 businesses, including global firms. Diverse industries and expanding employment opportunities are also producing a draw, with over 100,000 new jobs expected to be created by 2040.
Liverpool has been steadily regenerating for over three decades, and with huge commercial investment in projects such as the £1-billion Liverpool One and the Baltic Triangle’s Cains Brewery Village, a £150-million leisure and retail development set to contribute £25 million each year to the local economy.
Liverpool is a rising star in the UK property market and with limited supply and rapidly increasing demand for superior housing in the heart of this vital city, property investors would be prudent to consider opportunities here.
Further north, Leeds is the UK’s fastest-growing city thanks to its strong levels of economic prosperity and dynamism. Leeds is also considered as one of the prime employment hubs in the UK. It is also a centre for sport, shopping and tourism and boasts a range of educational institutions of excellence and expertise.
Leeds’s thriving economy has encouraged investment in the city and its regeneration projects worth £7.3 billion are currently under way or in the pipeline, adding to the more than £3.9 billion of major development schemes that have been completed in the last decade.
Additionally, with so many students in the city, many of whom stay on after graduation, as well as young professionals making the most of the city’s diverse economy, Leeds has a healthy rental market. The vacancy rate has nearly halved in the past decade, reaching a low of 2.5 per cent last year. JLL predicts that Leeds will have the largest increase in rents compared to Manchester and Liverpool, at 18.8 per cent between 2018 and 2022.
With vibrant economies and soaring populations, the northern powerhouse cities have established themselves as global investment hotspots. Historically, London has always been the primary option for property investment, however, with the strengthening of the government-led Northern Powerhouse initiative, cities like Liverpool, Manchester and Leeds are great for investors looking for more affordable properties that still offer a healthy rental yield and capital growth.
Richard Bradstock is director and head of Middle East at IP Global. The views expressed here are his own.