As part of a continuing policy to create what is known as ‘the northern powerhouse’ the Chancellor George Osborne has announced funding of £60 million for a HS3, a high speed rail link between Leeds and Manchester to cut journey times between the two cities.
He also announced £75million to explore options for an 18 mile Trans-Pennine road tunnel between Sheffield and Manchester which would be the longest road tunnel in Europe. Both projects are in the early phases of development and if they go ahead billions more will be invested in the region in the coming decades.
Experts believe that prices and demand for property will rise and while this will be good news for those selling it also means that first time buyers will find it harder to get on the housing ladder if values increase.
There could be a large influx of foreign buyers to the region, according to Jan Crosby, head of housing at KPMG, as connectivity across the region and with the wider UK is a significant tick on their wish list.
‘While property investors from the likes of Asia and the Middle East have been interested in the Government’s narrative around the Northern Powerhouse, they have been waiting for the words to be backed with action and financial commitment to improve the region’s infrastructure before making large scale investments,’ she explained.
‘The issue for these investors has been end user demand for property across the North as the scale of appetite simply isn’t as high for housing or for commercial property as they are used to in London or the South, because the ecosystem of infrastructure hasn’t been there to create an environment which attracts the end user in significant numbers,’ she pointed out.
‘However, with HS3, improved road links and a trans-Pennine tunnel all garnering the Chancellor’s support, occupier demand for homes and business in the surrounding areas will rise, which we can expect to attract international property investors looking to place their money outside of the capital’s heated market,’ she added.
Graham Davidson, managing director of buy to let specialist, Sequre Property Investment, believes that the job creation that will come with the infrastructure projects will result in increased demand for property, providing a positive outlook for buy to let investors who are chasing returns that have been squeezed out of London and the South East.
‘Since the Northern Powerhouse agenda was first touted two years ago, our own business has seen a circa 30% rise in interest in northern property at a granular level with many millions being invested further up the chain at a global level in residential and commercial projects. The message is more clear than ever; the north is open for business,’ he said.
The new routes across the Pennines and between Manchester and Leeds will open an abundance of property markets to new buyers, according to Glynis Frew, managing director of Hunters Property Group, and he does not necessarily think that prices will soar.
‘HS3 will give people more choice over where they want to and can afford to live. This will stop the markets becoming saturated and should stabilise prices. We would also welcome funding for HS2 as we are already seeing areas such as York and Leeds being considered London commuter belt territory as buyers and tenants take advantage of more affordable property prices,’ he explained.
He pointed out that the north currently has very strong lettings and sales markets due to strong price growth, high rental yields and cheaper rents in comparison to the South. ‘The market has experienced a 35% increase in buyers looking to invest in The North and this can be partly attributed to previous investment in the region. We have seen this in Yorkshire, Merseyside, Sheffield and Manchester, to name just a few locations,’ he added.
However, Ian Wilson, chief executive officer of lettings and property management franchise Martin & Co, voiced concern that there might not be enough capacity in the lettings market to cope with the infrastructure investment.
‘There will be contractors, architects and planners working in these places for the next 20 to 30 years to provide the infrastructure programmes, the majority of whom will rent. Whilst the north of England requires these services in order to compete on a national scale and make it a more appealing place to live, projects such as this are reliant on a buoyant private rented sector to support it,’ he explained.
‘Instead of supporting private landlords and ensuring there will be enough rental properties to support the temporary growth in population, the Government is imposing punitive measures which actively impinge upon this sector of the housing market,’ he added, referring to tax changes that come into force for landlords in the coming months which will see an extra 3% stamp duty tax on additional homes and changes to mortgage interest relief tax.
