Volatility of Chinese equities. The devaluation of the yuan. Cooling measures and falling prices in the Hong Kong and Singapore property markets. These are tough times for investors in Asia and for many, patience has worn thin. They’ve needed to take action.
As such, many investors have turned to the UK. Select Property Group has seen an 835 per cent increase in investors from Asian territories, such as China, Hong Kong and Singapore, buying property in the UK since 2010. Such sustained activity prompted Select to open an office in Singapore at the end of 2015 to better service the growing community of Southeast Asian investors.
While domestic markets continue to decline, UK real estate boasts the performance levels investors are desperately seeking. In the 12 months leading up to March 2016, UK property earned investors £19,000 on average, while figures from the Office of National Statistics also show that average monthly yields grew by 2.6 per cent over the last 12 months.
Furthermore, returns in a strong and dependable currency also add more weight to the appeal of investment in the UK, while a wide product range, including residential property and serviced apartments, also help diversify portfolios.
Yet although British property is the international asset investors are frequently turning to, London, the UK capital and financial centre, is no longer the city they’re targeting.
London: A city at the end of its growth cycle?
Those that bought in London in the mid-1990s did so at the start of a property boom. Over the last two decades prices have soared, and now the average asking price in the capital stands at £534,785 — 182 per cent higher than the average collective value of property in England and Wales.
While this is great for existing investors, it makes London increasingly unaffordable for first-timers. This was further underlined by the increased stamp duty levies UK property investors now must pay from 1 April 2016. This means it would cost an additional £32,782.80 in stamp duty alone to acquire that average London property.
Outlaying these huge sums to enter the London market no longer stacks up from an investment perspective, either. The rapid acceleration of property values in London appears to be slowing. In April, property portal Propcision revealed that asking prices in some of the most exclusive addresses in prime central London have been slashed by as much as 40 per cent as a result of declining buyer demand.
Monthly gains are also slowing. Yield growth in the prime central London sector fell by 0.7 per cent in December, its lowest level in 18 months; while LendInvest warned investors in May that they could achieve 200 per cent higher yields by buying outside of London.
A new city has now been identified. One on the verge of its own new growth cycle. One that is delivering the level of returns that Asian investors are searching for.
Manchester: The UK’s property investment hotspot for the next decade
Famous for its music, sporting prowess and industrial innovation, the north-west city of Manchester is fast becoming synonymous with property investment, too. Over the last 12 months it has topped numerous indexes that chart growth and performance:
• £8.2b commercial investment — the highest amount for any regional city (CBRE)
• The top regional city for property investment (Savills)
• Highest property yields in the UK (HSBC)
• The best place to invest for the next decade (House Simple)
Not only does Manchester possess the investment fundamentals presently, it also offers huge investment potential for the future. Manchester is home to one of the UK’s most under-served residential property markets. It is a young city, with 60 per cent more 25- to 29-year-olds living there than the UK average. The growing demand for renting in Britain is being driven by a generation that no longer equates homeownership with success, and 85 per cent of people living in Manchester city centre rent privately.
To house this young population, 8,600 new units are needed each year, and this will rise to a latent demand of 11,700 by 2022. Yet there is a pipeline of just 8,072 new units expected over the next four years.
Manchester is also central to the £56b plans for the Northern Powerhouse, a government-led initiative to boost economic growth in the north of England, that attracted huge interest in the Far East when Chinese president Xi Jinping visited the city in 2015.
Huge investment in transport, education and commerce is expected across the northern region over the next few years and, as its largest economy, Manchester is well placed to capitalise on the expected growth. As the population and job levels rise, so will demand for accommodation, and investors are already securing assets now to ensure the highest returns ahead of the predicted growth curve anticipated for the city’s property market.
For further information on Select Property Group and its latest investment opportunity available directly from their office in Singapore, click here.