Steve Cooper
With the market forecast to see an increase in the number of apartments available as tired investors liquidate their assets (1) you could be forgiven for being wary of individual or blocks of apartments as an investment. However, it could be argued that a change is on the horizon.
The Guardian reports that city-workers are increasingly moving to suburban and sub-prime areas as they’re simply being priced out of the market (2). Areas of central London are now even too expensive for young bankers. As such, young professionals are looking for properties further out, close to viable transport links and enjoying the trade off between proximity and price.
Areas within the Northern Powerhouse Region i.e. North of the M62 Corridor and South of the Scottish Border, are set to see widespread government investment in infrastructure and transport links (3). For potential tenants this intends to bring greater commuting opportunities, a larger pool of prospective employers and an increased number of viable suburban areas in which to live at out-of-town prices. For investors this may create opportunities to invest in properties that would otherwise have a smaller pool of potential tenants, such as properties in small villages that sit on a direct commuter link with a major city. For developers this may create a demand for more properties around major out-of-town transport links thus making apartments an interesting asset class.
It’s no secret that apartment blocks allow a larger number of people per square feet of footprint than a traditional single-family-let. This makes them an ideal solution to creating a large amount of living space near railway stations and bus routes (for example). Since 2005 the average price of a flat in London rose 60% in ten years compared with just 41% for a terraced home, 32% for a semi-detached and only 21% for a detached home (4). The smaller purchase price was reported by the Mirror to be one contributor, however the proximity to transport links of flats compared to other property types has been a significant contributing factor. The South East tends to be several years ahead of Northern Powerhouse areas, as is shown by Crossrail. In addition to the aforementioned growth of apartments, Crossrail has contributed to a 20% increase in house price above the usual capital appreciation around new Crossrail stations (5) placing an additional 1.5million people within a 45minute commute of London. The Northern Powerhouse aims to replicate that success, albeit on a smaller scale, around Northern Cities.
Conclusions can therefore be drawn about the viability of investment into apartments. From the above findings it can be concluded that, where there is significant investment in transport links to major conurbations from smaller towns and villages, making commuting quicker and easier, it is also believe that there will be an increased demand for property. Furthermore it could be suggested that there will be a larger number of people in those areas now looking outside the city for accommodation that is as close as possible to those transport links.
Disclaimer and Legals
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References
- http://www.ft.com/cms/s/0/de675bce-f751-11e5-803c-d27c7117d132.html#axzz452HqlLgV
- http://www.theguardian.com/uk-news/2015/jun/29/goodbye-london-moving-to-brighton-house-prices
- http://www.infrastructure-intelligence.com/article/mar-2016/transport-north-reveals-12-month-route-map
- http://www.mirror.co.uk/money/personal-finance/one-type-property-booming-prices-6496559
- http://www.homesandproperty.co.uk/area-guides/greater-london/here-comes-crossrail-hot-homes-along-londons-highspeed-rail-link-38621.html
