Yann Murciano, CEO at development finance and bridging lender Blend Network argues that the tide is about to turn as the Government’s ‘build, build, build’ strategy aims to ‘level-up’ the UK economy by investing in parts of the country that for decades had been left unloved.
The UK economy has long been characterized by a north/south divide for a number of reasons and when it comes to the housing crisis, this remains. Therefore, it was not surprising that one of Prime Minister Mr. Johnson’s key messages during and after his 2019 election campaign was his vision to reboot and rebalance the economy by ‘levelling up’ the north and unleashing Britain’s potential with a post-Brexit red tape cutting bonanza. Back in 2019, he vowed to link the countryside and towns to their regional economic hubs with faster, better transport, a message that’s been amplified by Mr. Johnson’s pledge to ‘build, build, build’.
In the second quarter of 2016, the period leading up to the Brexit referendum, the average house price in the Northwest of the UK stood at just under £150,000 (to be precise, £149,572 according to data from the Nationwide house price index). Fast forward four years, in the second quarter of 2020 and in the wake of the Covid-19 pandemic, this region had witnessed the most dramatic house price increase of all UK regions, a staggering 14.9%. The east and west midlands followed suit and were the regions with the next highest house price growth, 14.5% and 13.3% growth respectively between the first half of 2016 and the first half of 2020.
In contrast, London and its outer metropolitan area lagged behind the house price growth witnessed since Brexit. In fact, London was the only UK region to see a house price decline to the tune of 1.3% between the second half of 2016, in the immediate aftermath of Brexit, and the first half of 2020. Figure 1 shows the magnitude of this north/south divide.
Prime Minister Mr. Johnson’s strategy to ‘level-up’ the UK, along with an expected ‘mini exodus’ from the cities to the countryside post-Covid, is most likely to support this trend in years to come. Therefore, we expect to continue to see parts of the north and the midlands to outperform other regions and landlords must watch this trend carefully in order to drive value from their property portfolio.
But parts of the north and midlands also boats a significant stock of old industrial buildings with a significant potential for redevelopment. For example, at Blend Network earlier this year we agreed on funding for the conversion of an old shoe factory in Northamptonshire with planning to convert into 24 apartments. Indeed, parts of the north are full of beautiful and impressive buildings, some of which have already been converted and some others are waiting to be converted. Examples include the Turnbull Building, a former print works and ironmonger's warehouse in the heart of Newcastle, now home to luxurious apartments.
In summary, landlords and property investors must keep an eye on the north and those other parts of the UK that for decades were left unloved and un-invested. But they also must ensure that they have solid lenders they can build relationships with and who will support them in their journey to build or expand their portfolio. At specialist lenders like Blend Network, we have been actively lending across the north and midlands, a market that we know well and like due to its strength and shortage of housing.
