Prime property markets in the regions will flourish as investors are pushed out of London by spiralling prices and higher taxes at the top of the market, according to a report. Chancellor George Osborne introduced a number of property tax rises, including significantly higher stamp duty for additional and expensive homes.
Together with global economic weakness weighing on demand from foreign investors, and the belief that some areas in the city centre have seen the top of the market. There is also the belief that after years of sharp price rises, the prime property market is stagnating. Now investors will look outside the capital for higher returns as big infrastructure projects such as HS2 make other cities more appealing.
"Significantly, the issues facing the London market are potentially playing into the hands of other cities across the country," stated the London Prime Residential Pipeline 2016 report by Arcadis, a construction consultancy. "Birmingham and Manchester, in particular, are coming up on the rails as developers and investors — boosted by the more affordable land values and the government's long-term infrastructure commitments — are looking to alternative locations for prime residential investment."
Estate agent Stirling Ackroyd said in its London New Homes Monitor report that the top quarter of the market saw prices fall by 2.4% on average over the year to the final quarter of 2015 amid tax rises and global economic turmoil. The rest of the London market saw a 8.4% price growth.
Research by LendInvest, an online marketplace for property investment, found that buying more properties outside London can provide a higher rental yield with a lower stamp duty bill across all price brackets for investors.
"It's no surprise that you can get as many as 10 similarly-sized properties in some cities for the same price as a single property in London," said Christian Faes, chief executive and co-founder of LendInvest. "But it is surprising that those non-capital properties offer a far more impressive rental yield, and a smaller total stamp duty bill to boot."
For example, a £250,000 investment will only buy a single studio flat in London. But the same amount could secure two three-bedroom properties in Durham, which will generate a 200% higher rental yield and a 30% lower stamp duty bill.
At the top-end of the market, landlords with £1m to invest can buy ten two-bedroom flats in Liverpool or one of the same in central London. But the Liverpool option would see a 20% higher rental yield with half the stamp duty costs.
"The real game changer that will accelerate future regional growth is the move to fiscal devolution deals across the UK," said the Arcadis report. "Devolved combined assemblies are empowered to take control of collecting business rates and co-ordinating the spatial planning and infrastructure priorities across their regions in line with a common economic development plan. So, too, will enterprise zones create clustering opportunities for businesses, along with improvements in amenities, social infrastructure, education, health and housing."