There’s been significant media discussion in the last week or so about escalating house prices, following the announcement that prices in England have hit a record high. The average house price has now actually exceeded the January 2008 peak by 0.9%. But commentators are divided as to how positive this development is, with some raising clamours of a housing bubble, whilst others are embracing the news as a sign of the economy’s continued upward trajectory. The shrewdest have drawn attention to the distortion that London house prices have put on the figures as a whole, noting that prices outside of the capital and the south-east are actually 4.8% lower than pre-crash levels.
While this may not be cheering for everyone, the regional discrepancy in pricing actually opens up numerous opportunities for those brokers and clients ready to seize them – from residential buy-to-let opportunities in commuter-heavy towns, to commercial and semi-commercial properties in previously neglected regions.
Here at Shawbrook Bank, our Commercial Mortgages team have seen a real pick-up in demand for office space outside of London. As the cost of living in the capital rises ever higher, more and more people are turning elsewhere to situate their business. By taking into account factors such as demographic changes, infrastructural developments, and the positive impact of advances in technology and telecommunication, business owners and directors are recognising the profitability of relocation. Commercial brokers and their investor clients are increasingly taking advantage of the opportunities this affords.
The escalation in London prices has also led to an increase in the number of young professionals, families, and immigrant workers looking to rent outside of the capital, with many then commuting for work. Savvy brokers and investor clients are spotting the huge potential for buy-to-let investment in these areas, with the promise of high returns in the shape of rental yields, as well as attractive capital gains in the long-term.
This huge regional potential is something house-builders are also clocking on to, with a number of regionally-based firms reporting a surge in profits recently. Indeed one commentator (John Grindrod in the FT) suggested that developing brand new towns is the answer to the UK’s property issues.
While we can’t necessarily endorse this last suggestion, at Shawbrook we have found that an increasing number of brokers are approaching us with clients seeking loans secured on newly built properties. What’s more, a significant number of these are outside of London.
The prospects for brokers and investors away from the Big Smoke, then, are considerable. And while many of the big banks are still saddled with legacy issues, specialist banks like Shawbrook are ideally placed to help brokers profit from this opening in the market. Our human underwriting means we treat each case on its own merits, so we take into account factors such as the demographic of the location, in the same way that you and your clients do. Brokers are central to our business, so we endeavour to help you spot and take advantage of new opportunities wherever we can.
But perhaps most importantly, we’re not short-sighted; we consider the long-term implications in our assessment of every application – be that possible changes to interest rates, or planned developments to transport links. We believe in looking to the future landscape of the property market, and we predict that that landscape encompasses a lot more than just the London city sky-line.
