When an investment method achieves the status of an everyday phrase you could be forgiven for taking it for granted. “As safe as houses” has been a watchword in British investment for the last 50 years and more. But with the UK’s economic landscape set for a radical post-Brexit shake up the old certainties are being reassessed.
Investing in bricks and mortar may not be quite the guaranteed money spinner that it once was.
According to Property Specialists, The Open Property Group the downstream effects of Brexit are yet to play out. The current currency uncertainty is merely a reflection of the market’s fear that something worse may be around the corner as and when article 50 is actually invoked. But that uncertainty is in itself having serious effects.
Uncertainty is the enemy
The key question, of course, is what those longer-term effects might be. Ordinarily, the volatile pound, historically low interest rates and a widely discussed housing shortage would all point to the merits of investing in domestic property. But things are never quite to clear cut – and absolutely nothing fits that description when it comes to Brexit.
Take for example the fact that luxury property sales in London are down by a staggering 86%. Anyone who has staked their pension on a surge in demand in Kensington, Knightsbridge and Chelsea might be set for slim pickings in the years ahead.
The luxury end of the market is hardly representative, but with yields across the board between 0.2% and 0.8% there is clearly scope to take a more detailed look at the state of the market. In that respect, London and the South East offers a scenario that is patchy at best. In contrast, the steady rejuvenation of the urban cities of the North is delivering consistent growth, a healthy demand, rising rental incomes and steadily rising property values.
Northern England may have been fashionable amongst music lovers since the 90s, but as an investment magnet it has tended to be less magnetic. That is now changing.
Cities such as Hull, Leeds, Sheffield and Manchester are emerging from the long dark shadow of de-industrialisation to offer radically transformed, technology-inspired areas of local prosperity. As a result, an increase in local wages and a rising demand for quality accommodation are pushing up house prices at a disproportionate rate. Manchester, Nottingham, Hull and Blackpool have featured prominently on the list of best rental yields nationally for the past two years. The same virtuous cycle is also seeing a boom in commercial property values.
Investors are, at last, waking up and catching on to the emergence of what may or not be a “Northern Powerhouse”, but that is unquestionably a favourable investment climate. With investors in parts of London and its environs seeing their property returns squeezed at every turn, there is every reason to look to the potential of property in the North – albeit with one important qualification.
As it turns out, “safe as houses” may not have started out meaning quite what we understand it to today. It turns out that ‘safe’ used to be used to mean something like ‘certain to happen’, so “safe as houses” might have originally been an acknowledgement that houses would always be built. It may have had nothing at all to do with investment security. That knowledge should help ensure that, when it comes to property, we don’t take too much for granted.