The Venice of the North, as one taxi driver described Newcastle, may be a little over the top, but the city certainly has its attractions, and has changed markedly in the last 20 years. Like many of the UK’s industrial centres, it saw some tremendous highs and lows in the twentieth century, and is now having to find to find a new voice that will serve it proud in the twenty-first.
Regeneration is very much the theme that runs through a lot of the work happening in the city. The docks and riverfront have been given a facelift that few could have believed possible around 10 years ago, and the employment market has been bolstered by a move away from heavy industry to newer and more numerous service industry jobs. On the Gateshead side of the river (South) the Sage centre is under construction and promises to further uplift the riverbank. Spanning the Tyne, the new Millennium Bridge is another recent addition to Tyneside, and as one local put it: ‘Our Millennium Bridge does not wobble either.’
The rebuilding of St James’ football ground where Newcastle United ply their trade has also been a great success, and the stadium is one of the leading sport’s arenas in the country.
Looking to the future, Newcastle is in the process of bidding for the mantle of 2008 European City of Culture, and if it gets the decision it can only do more good for the area. Not only would the move generate capital and investment, but would also help Newcastle move further away from the grey and tired image that has been with it for so long.
Raising the standards
Newcastle has not seen the astronomical increases in its housing market that some parts of the UK have, but prices are on the up. Having risen steadily, they are more likely to remain stable should there be a future stumble in other parts of the UK, and the amount of new building visible on the city’s sky line bears testament to the confidence that the developers have in the area.
Gary Thorpe, principal for broker Newcastle Mortgage Services, says the housing market in Newcastle is like the city’s weather. It never gets the best of what is on offer in the UK, but it is also spared the worst. He is adamant Newcastle prices will not drop and says an ageing population, a shortage of housing stock and low unemployment in the region all point to the market faring well in the months to come.
Although the ageing population is a national issue, Thorpe says the employment and demand issues are local, and different to other regions. As such he says the city is not directly affected by what happens in other areas of the country, and what happens in London and the SouthEast has very little direct effect on the local Newcastle market.
There may be plenty of new building going on and healthy increases for those with property to benefit from, but Thorpe does have concerns for first-time buyers coming into the market.
He says: ‘At the minute it just seems to be apartments and townhouses and I do not see many starter homes getting built at all. There is also stuff like your £100,000 plus new-build out in the suburbs with your white picket fence, garage and two point four children, which is fine, but where does your first-time buyer go now and how does he get on to the property ladder?’
Personalising the story, he mentions a client who was desperate to move out from his parents house. After going through his finances with Thorpe, he realised he could only afford a property for £52,000 and would have no spare cash for the rest of the month after paying the mortgage. Although Thorpe said advising his client to make up with his parents and stay at home was not a popular piece of advice, it is a reality facing an increasing number of younger first-time buyers.
Properties to be had
However, for those slightly older and better off, there are houses to be had. John Stocker, who help set up the mortgage intermediary the Oakapple Consultancy, a subsidiary of financial adviser, the St James’s Place Group, says there are still properties around for first-time buyers. They are becoming more expensive, but he says there is plenty available in the £50,000 to £60,000 price bracket which, for most, is still affordable.
Stocker explains: ‘It is not so bad here for first-time buyers as it is in the South, and you can still get reasonable property for £50,000 or £60,000 and often cheaper, so it is not a case that people cannot afford to buy. There are also areas where the prices have shot way up but this has happened everywhere.’
Speaking of the popular areas, Stocker says Jesmond and Gosford are very popular suburbs. Thorpe agrees and comments: ‘Jesmond itself is an enigma really and always has and always will be popular. It is a hotspot for students and has created its own culture now with its own nightlife, hotels, and cafÃ© bistros. With its own restaurants and bars it is also a hotspot for landlords and young professionals.
Everybody wants to live there, and demand has driven prices higher. A two-bedroom flat will go on the market for around £130, 000, although prices of up to £160,000 are not unusual for the area. Thorpe mentions a friend who bought a house for £165,000 two and a half years ago in Jesmond and has recently had it valued at £375,000. While, in general, the rises being seen in Newcastle may not be leading the UK market, the hotspots like Jesmond do as well here as anywhere.
However, the market overall has been slightly cooler and this is promising for the future. Stocker says: ‘From 1990 to around 1995 prices were static ‘ nothing happened. Even moving out of that the rises were slow and so I think what we have had over the last few years is really just catching up from the beginning of the nineties. We have returned to a level now where if prices had been going up at an annual rate of 5% over the last 12 years then we would be around where we are just now. Prices have probably gone up around 20% a year over the last few years but over the whole period it is evening out.’
Phillip Bowes, of chartered surveyors BIV Bowes, agrees Jesmond, and Gosforth lead the popularity stakes, and says the regeneration that has happened on the quayside has put the squeeze on prices in other parts of the city.
Traditionally low-cost areas such as Byker and Walker are now seeing interest coming from those forced to consider the areas as prices elsewhere have risen. Bowes says they are now popular in their own right. Five years ago people could not get rid of properties in these areas for £15,000, now flats are going for £60,000.
It is not only the city’s suburbs that are proving popular, and Bowes says many of the outlying towns and villages are now proving attractive. He himself lives in Tynemouth Village, 10 miles out of the city. Traffic permitting he can be at work in 15 minutes and the journey barely qualifies as a commute. With decent roads in and out of the city satellite towns such as Bedlington and Cramlington are also proving popular with city centre workers.
Like Thorpe, Bowes believes the Newcastle market will bear up well in the months to come. What he is most encouraged about is the level of employment, which he believes is underpinning the housing market and associated affordability issues.
He comments: ‘The very top end [of the Newcastle market] is starting to level off and this is already happening down by the quayside because there is only a finite number of people with that sort of money to move into these places. But the bottom end is coming up and this is why I think our market is very strong. There are a lot of job opportunities at the lower end of the market. When the last crash occurred… There was plenty of money floating about for the stockbrokers and the like, but when you got down to the lower end of the labour market there was very little there. Now there is a lot of support coming from the bottom up and we have a lower unemployment rate here than they do in central London.’
Bowes is also confident that there is enough slack in Geordie wallets for homeowners to absorb possible interest rate increases, or for new buyers to clamber onto the property ladder if prices continue to rise.
Bowes says the Newcastle population is keener than most to go out from Monday through to Sunday. Although cutting back on entertainment would be painful for most, he says there is certainly room for North East residents to do so if the need arises, and this should also help act as a buffer to future problems.
Looking to the future, Bowes is confident about business, and believes volumes will hold up. He feels there will also be a lot of work to be had for surveyors when the Home Information Packs (HIPs) are introduced, although he does not think they are such a good idea.
Bowes is worried that in being a more detailed survey, the report in the HIPs will increase surveyors’ liabilities and send already high insurance costs soaring further. He also questions whether or not buyers will accept the survey that has been done on behalf of the seller and so end up having the work repeated by their own surveyor, further increasing the cost and time of the house buying process.
Future changes in the regulatory framework are also set to hit the broker market in Newcastle, as they are across the country.
Both Newcastle Mortgage Services and the Oakapple Consultancy already get much of their work from financial advisers who do not do mortgages. Thorpe says the new regulation is a good thing and that it will encourage intermediaries into the sector and drive volume. Older financial advisers who already have a raft of investment and pension qualifications will be loath to take further exams and are likely to simply refer business into mortgage operations as is already happening. However, for those looking to set out in the financial services industry, the prospect of being able to concentrate on a single area such as mortgages and protection is likely to prove an attractive option with the possibility of using the sector as a stepping stone into the wider market. As such Thorpe feels regulation will also help stimulate the recruitment of younger people into the broking community.
Thorpe says: ‘It is difficult for people to start in the industry now with it in its current state and I see the mortgage side as a way into the whole side of the industry where it is not so intense with regard to the investment and pension products. People can just come and concentrate on two or three different areas. There is nothing wrong with that and, from a borrowers point of view, at least the adviser is specialising in one area.’
On the lending side, all the major players serve Newcastle, as one would expect of a major city. Of these, Northern Rock has perhaps made the biggest impression in the city having its roots in the North East.
The site the lender now occupies is currently undergoing a £90m development, which started about two years ago and will in the most part be completed during 2005. When Northern Rock moved onto the site in 1968 it housed 250 staff. It now hosts around 2,500, of which around 1,000 have been added in the last three years, with further recruitment planned.
The lender’s close ties to Newcastle will be plain for all to see next season, when Northern Rock will begin its sponsor ship deal with Newcastle United and have its name on the team shirts. According to Ron Stout, communications manager at Northern Rock, the lender also has close ties to the Newcastle Falcons rugby team and the Durham cricket team, helping to make its name synonymous with what is happening in the area. One move Stout is particularly proud of is the charity donations that are made each year. 5% of pre tax profits are given to local NorthEast charities and Stout says some £84m has been given since the flotation in 1997.
Although Stout says much of the growth that Northern Rock is enjoying, has come from tapping into southern markets, he says its heartland is very much the northeast.
Northern Rock is also confident about the outlook for the housing market in the city and Alistair Laws, chief valuer for the lender, says: ‘The housing market throughout the region continues to exhibit steady price increases in most sectors. Indeed some regional hotspots reported annual rises of 20% or more.
‘Demand continues to be underpinned by a general lack of available properties on the market which continues to benefit from low interest rates and affordable mortgages. We expect the housing market in the northeast and Cumbria to maintain a steady and sustainable pace with only a slight levelling off as we progress through 2003. Although certain hotspots will again show price increases well into double figures an overall increase in prices generally of between 7% and 9% is considered achievable for the year ahead.’
Newcastle may not quite be Venice, but it is moving in the right direction. As Stocker concludes: ‘The city is a lot more vibrant and has changed a lot in recent years. I hope the regeneration continues. The city looks a lot nicer and there is a better atmosphere in the whole place. It began to happen in the early nineties, but it is now starting to have an effect and the changes are really beginning to take hold.’