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The Northern Powerhouse is a magnet for overseas investment – words Alexa Wang
The Northern Powerhouse cities of Liverpool and Manchester are proving to be a magnet for sustained overseas interest and investment. Both cities have quickly positioned themselves as two of the biggest economic propositions in the UK.
Liverpool is a pivotal cog in the UK’s economic machine. It contributes £28 billion Gross Value Added (GVA), with much more growth expected in both the short and long-term future. Manchester’s economy is currently worth £57 billion.
Both cities have an increasing population, strong workforce, buoyant student numbers, more job opportunities in the professional sector and resurgence in its commercial and retail sectors. The need and demand for high quality buy to let accommodation is constant and paramount to the future of the Northern Powerhouse.
So, it’s no surprise that overseas investors from all four corners of the globe are flocking to the North West of England for exciting and profitable ventures. When it comes to buy to let property investment, the two cities are streets ahead of their contemporaries and competitors.
House prices have grown in the Northern Powerhouse faster and more consistently than anywhere else in the country. The region experienced growth of 5.6% in the 12-month period ending July 2018. London witnessed negative growth of 0.7% across that same period. The wider South East region suffered a similar malaise; only 1.8% of growth in that time. Against the national average of 3.1%, the Northern Powerhouse is racing ahead of every other UK region.
Recent research suggests that a clear majority of Middle Eastern property investors will soon be planting their money in the UK, with 13% citing Manchester specifically as the city that they consider the most attractive.
A total of 70% of those investors consider the high rental yields in Northern cities, particularly Manchester and Liverpool, as not just better than London’s, but the primary reason for making their investments in the region.
Such low starting costs and high rental yields in Liverpool and Manchester are the factors that makes leading property firms such as RW Invest subject to such high demand for high-end, luxury properties in the city. RW Invest offer investors between 7% and 9% returns on their properties in the Northern Powerhouse.
Liverpool and Manchester have experienced huge surges in interest and enquiry from China. In the 12-month period up to January 2018, Chinese enquiries into property in the region rose by triple figure percentages.
Interest in Liverpool soared by 160% during that period. Similar enquiries into Manchester jumped 256%. Far Eastern buy to let investors are, as shown, attracted to the wealth of available luxury property at low starting costs that promise high yields to landlords, who will also have a huge number of potential eager tenants to choose from.
London is proving to be of little interest to those same investors. During the year to January 2018, enquiries into London property dropped by nearly half. Developers and property firms are unable to sell their stock. In the second quarter of 2018, almost half of all London new-build sales to investors were in bulk. It is a signal that London’s buy to let market is in freefall; a far cry from the current climate in the Northern Powerhouse.
The decrease in overseas investment and interest in London is a trend that is becoming common across the rest of the UK with one exception: The Northern Powerhouse. UK projects driven and funded by foreign direct investment (FDI) have fallen in 2018 for the first time in five years, affecting much of the rest of the country.
Inevitably, the trend is reversed in the Northern Powerhouse. In 2016, the Northern Powerhouse was in receipt of 90 FDIs. Of that number, 54 of those were first-time investments from overseas. Liverpool and Manchester attract not only increased investment from abroad but both appeal to new generations of investors who understand what an open and profitable market the region is. Manchester attracted 43% of all direct foreign investment deals in the North West region in 2016. That is a 17% increase in such deals on the year before. The United States was the single biggest overseas investor in the Northern Powerhouse during 2016, with 25 FDIs coming from across the Atlantic. Manchester alone accepted more FDI projects than such notable global cities as Toronto and Barcelona.
It is plain to see where investors should place their money. The Northern Powerhouse, particularly Liverpool and Manchester, are the biggest economic hopes in the country. Investors would be wise to take their chances in cities that offer low entry costs, a welcoming market and the chance to make incredible returns on their ventures.