North and East Midlands top for commercial property investments
A study by specialist lender Together found that 39 per cent of landlords saw the East Midlands as the best region in which to invest.
The regions perceived as next most lucrative for property investing were the North East and North West, at 37 per cent, followed by the West Midlands at 27 per cent.
The Northern Powerhouse initiative was cited by 47 per cent of landlords and the Midlands Engine by 40 per cent saying that such programmes boosted their confidence to invest.
London was rated highly by 36 per cent of landlords, but only eight per cent were keen to invest in the South East or East Anglia.
Offices and semi-commercial
In the North, the top three development opportunities were identified as offices by 49 per cent, semi-commercial properties by 43 per cent, and for 41 per cent, flats.
In the Midlands, the best opportunities were seen as offices by 44 per cent, flats by 40 per cent and semi-commercial properties, 30 per cent.
“That underlines the need for lenders who avoid the one-size-fits-all approach and have the flexibility to agree funding within what can be very tight deadlines,” said Andrew Charnley, head of corporate relationships at Together.
The study questioned a national panel of 97 commercial landlords online during August.
Government pledges £62m flood fund to protect over 9,000 homes
Some 13 projects across England will benefit from the £62m fund, which as well as helping develop existing flood defences, will aim to boost economic regeneration and increase prosperity in those areas. Many of the projects are located in communities which suffered from flooding during the winter of 2015.
In total, more than 9,000 homes will be better protected.
Villiers said: “Events this summer have shown that investing in flood risk management is more important than ever, and this funding builds on our long-standing £2.6bn commitment to better protect 300,000 homes from flooding and coastal erosion over six years.”
The funding will support the development of 11 projects in the Northern Powerhouse, including seven in Yorkshire, four in Cumbria and Lancashire and two in the North East.
Some £19m is set to go to Calder Valley, where the Mytholmroyd, Hebden Bridge and Brighouse schemes will be developed. With this boost, the two projects at Hedbden Bridge and Brighouse will be developed, with work due to begin next year.
Communities in Yorkshire will also receive additional funding with more money for the Tadcaster Flood Alleviation Scheme and additional funding for defences at Sowerby Bridge.
Cumbria and Lancashire are due to receive the second largest amount of funding, with £22.8m available to support four flood projects in Kendal, Egremont, Flimby and Preston and South Ribble.
The proposed scheme for Kendal involves three phases, of which the first will provide a one in 50 level of protection for 1,480 homes and 1,151 businesses.
This round of funding will also allocate £6.3m to projects outside of the Northern Powerhouse, in Essex and Lincolnshire.
In Essex, the River Roding project at Shonks Mill will better protect 550 homes in Woodford and its surrounding areas, while in Lincolnshire, the Lincoln Defences project is set to reduce flood risk to 1,842 homes and 424 businesses.
Emma Howard Boyd, chair of the Environment Agency, said: “This extra funding will help us to go even further in our mission to better protect communities up and down the country from the terrible effects of flooding. We will work closely with these communities to design and build projects which not only reduce flood risk but which also benefit wildlife and the local economy for decades to come.”
The Environment Agency has completed construction of more than 500 new flood and coastal erosion schemes since April 2015, better protecting over 195,000 and thousands of businesses.
By the end of this year, the government will set out its policies to better prepare the country for flood and coastal erosion in a government policy statement.
Councils need flexible funding for house-building, says ICE
In its report ‘Delivering a Northern Infrastructure Strategy’ the body sets out its recommendations to drive economic growth and improve quality of life in the North, as part of the wider Northern Powerhouse initiative.
Along with encouraging central government to devolve revenue raising and borrowing powers and calling for the creation of a Northern Spatial Plan to “guide and coordinate integrated infrastructure development” ICE says local authorities should “put in place standard approaches to assessing need and have access to flexible funding arrangements for new developments”.
The report states: “Local authorities have caps limiting their borrowing for housing developments. These are based on the debt the council already has, which varies significantly across the country. It does not bear any relation to the number of houses they have or the demand for new housing. Therefore, despite the prudential borrowing rules in place on councils and historically low interest rates, few local authorities can finance new house building.
“Allowing local authorities flexibility will enable investment to provide high-quality housing, suitable for their location. In turn, this will help to retain and attracted skilled workers, therefore making a significant contribution to attracting inward investment and in stimulating regeneration.”
Is the Northern Powerhouse running out of steam?
Yet in recent weeks the Northern Powerhouse rhetoric has take a more negative turn.
Last month, transport secretary Chris Grayling announced that planned electrification of railway lines in the North, the Midlands and Wales had been scrapped, replaced instead by ‘bi-mode trains’. The project had been labelled the “Crossrail for the Northern Powerhouse” and Grayling’s decision to scrap it was met with criticism.
Meanwhile, Liverpool City Region Metro Mayor Steve Rotheram was quoted in the Financial Times calling for the Northern Powerhouse project to be ‘jump-started’, claiming the scheme had stalled over the past year.
But how important is the scheme to the development industry in the North? And how detrimental will it be if the plans continue to be watered down?
“The last few years have seen a good increase in new investment coming into the North, however this really is just a small amount in terms of what is required to help significantly lift the micro-economies in this part of the country,” says Ashley Ilsen, head of lending, Regentsmead. “The problem I have with schemes such as the Northern Powerhouse is that they make for excellent political soundbites but when it comes down to substance there is very little in terms of actions being taken to improve the current situation. I’m not surprised that much of this has already been scrapped.
“Infrastructure improvements should be the priority however as a development finance provider I think more should be done to bring jobs and incentives for housebuilders in the northern regions; this is already an area where we have dramatically fallen short. My concern over the coming years is that with our impending exit from the EU I suspect we are going to see housebuilders struggle as costs are set to rise. The ones who are likely to be worst hit as a result of this will be those with tighter margins and a slower sales period, so unless we see government led incentives and serious levels of investment come into the North then I suspect the gap between the North and South of England will continue to become greater.”
James Bloom (pictured), managing director of development finance at Masthaven, is more positive about the initiative but says the whole of the region must benefit.
“I think it’s important that any further funds reach other areas so it’s not just concentrated on a few places (for instance, Greater Manchester is getting nearly twice as much funding as Leeds, which has a similar sized population).
“Areas that will benefit from the new high speed rail links, and strong commuter links to major cities, are really interesting hotspots to keep an eye on. However, the ‘watering down’ of rail route plans could potentially adversely affect returns; I think the devil will be in the detail.”
Record lending for Amicus after Manchester launch
The lender launched in Manchester late last year in an attempt to capitalise on the Northern Powerhouse initiative and “a part of the UK that is seeing high levels of growth despite an uncertain national economic backdrop”.
Keith Aldridge, managing director at Amicus Property Finance, said: “We are delighted to have achieved a record month of lending. We’ve seen tremendous growth over the last few years as our localised relationship-based approach resonates well with property professionals looking for specialist lending solutions in a buoyant short-term property market.
“We build our most successful loans on the bedrock of effective collaboration and strong relationships. Furthermore through our new Manchester office we have expanded nationally, cementing a strong on-the-ground base to fund local projects and service clients who are often overlooked by more mainstream lenders.”
The lender says it hopes to receive its banking licence later this year
Northern cities see strongest annual house price growth
It’s followed by Birmingham at 8% and then Bristol at 7.3%, as all three cities experience levels of house price increases not seen for 12 years.
In contrast, house price inflation in London continues to slow and has now reached 4.9% year-on-year, which means the capital is among the five slowest-growing cities, along with Oxford and Cambridge.
This is the lowest rate of house price growth recorded in London for five years as affordability pressures impact demand for housing.
The national figures look more robust, buoyed by the Midlands and the North. Hometrack said that buyers shrugged off fears of Brexit and took advantage of record low mortgage rates in the first quarter of 2017 to buy homes in larger regional cities where affordability is still attractive.
City level house prices grew 3.5% as a result, the highest quarterly rate of price inflation for three years. This pushed the annual rate of property price growth across UK cities to 6.4%.
Richard Donnell, insight director at the firm, said: “Buyers outside the south of England appear to be shrugging off concerns over Brexit and a squeeze on real incomes to take advantage of low mortgage rates.
“This is shifting the dynamics of the housing market. Cities that have been driving house price growth over the last two to three years, such as London and Cambridge, are now seeing a significant slowdown, while large regional cities continue to register robust and sustained levels of house price growth.”
Northern Powerhouse best for property investment: Kuflink
The index looks at the average house price and median rent in 50 major towns and cities across the UK, calculating the average rental yield for each location. It found that since January this year average rental yields have remained strong across 34 of the 50 areas analysed.
But it is northern towns which it believes will prove most alluring to investors with three major cities topping the list of highest yields:
||Average rental yield (%) March 2017
At the other end of the scale, some southern areas have struggled, with Chelmsford in Essex providing rental yields of less than 3%. London is also found in the bottom ten for rental yields at 3.45%.
Tarlochan Garcha, CEO at Kuflink, said: “This index shows that savvy investors should look to the regions where strong rents and more affordable house prices make for fruitful investment opportunities. The Northern Powerhouse is leading the way, while London falls by the wayside, as rents fail to keep up with rocketing house prices.
“The stability of both house prices and rents is a positive sign for buy-to-let investors, proving the strength of the UK’s property market, which is able to withstand the uncertainty surrounding the UK’s exit from the EU. The following few months will be the true test of the market, as Article 50 negotiations get underway.”
Kuflink’s index chimes with research from BM Solutions, which found that northern landlords were enjoying rental yields of more than 7%, while their counterparts in the south were generating returns of around 4.5%.