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North West Property - The Strongest Area for Investment?

15th November 2017

We believe The North West is one of the strongest areas in the UK for property investment at the moment and have been investing there ourselves for the past few years alongside our valued clients. Seeing an overheating London market and capital values in the South generally very high. We decided to take an income driven view on property investment and it seems many investors are following suit.

It’s no secret that capital values in London have been growing quickly and consistently over the fairly recent term… until this year, when they’ve started dipping in many of the pricier areas of the city centre and suburbs; Savills have recently reported Over the course of 12 months, the slowdown in annual rates of price growth has been dramatic; from 7.1% to -0.6%.” So, with capital growth uncertainty, tighter regulations on debt serviceability and increased pressures on Landlords from a tax point of view, now is really the time to make sure your money is working its hardest.

Let me explain debt serviceability… Lenders have recently put into place a more stringent check on whether the income from an investment is able to service debt levels, were interest rates to rise exponentially. The lender will check that the market rent is able to service the debt by up to 145% of the annual repayments at a test rate of 5.5% in some circumstances! This has recently risen from rates based around 125% and 4.5% respectively. This means that low yields and high LTV rates just do not work anymore. If you still want to invest with a small deposit, you need to be doing so with a yield of at least circa 7%. Couple this with the increased Stamp duty rates now payable for any home that isn’t your primary residence and it makes sense to look for lower prices and higher yields when leveraging your purchases.

So, what’s the North West got going for it?

In short, a lot! From a growing economy, backed by a number of government policies, to house price affordability, it’s no surprise many graduates decide to stay in Liverpool/Manchester/Leeds etc following the conclusion of their studies.

The average first time buyer pays £19,000 as a deposit in the North West, equal to 54% of their annual income. In London it’s £99,753, or 149% of their annual income! Then there’s Stamp Duty. The average Stamp Duty bill in the North West is £3,000 vs £25,700 in London! As you can see it’s a lot cheaper to get on the housing ladder and recent graduates appreciate this. A young professional workforce is great for the North West and I believe it will help capital growth through the next few years. and I’m not alone – Savills have predicted 5-year compound house price growth of 18.1% for the North West vs 7.1% in the capital.

So with all of this taken into account, and yields tightening as more people jump on board looking for their investment. Now is a great time to buy. Get in contact with us at Fresh Invest for some friendly advice.

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