Lucia France: A nice short, sweet question here for you. Do you have any suggestions regarding locations in the UK for the best possible returns on buy to let investments?
Paul Mahoney: A fairly common question. Returns can mean a number of things, though. There’s two main types of returns when it comes to property investment, and that’s income and growth. Your yield and capital growth. Those two things work for different people depending on what their goals are. Traditionally, the London and the southeast has been quite good from a growth perspective and the north has been better from a yield perspective. That, arguably, is shifting, in that for example London has had a very good run from a growth perspective and is now without doubt plateauing, in some areas falling. There’s lots of speculation as to why that is, but I think it’s just because it’s had a good run. We’re over 80% above the 2007 peak property prices in London, so a lot of areas have more than doubled in the past 10 years, and that’s a good run. Markets are cyclical.
Lucia France: Yeah, [inaudible 00:20:23]
Paul Mahoney: There are other areas in the UK at the moment which are doing really well, in a market where other areas aren’t. Places like the Midlands, specifically Birmingham, Manchester, Liverpool. Each of those cities have really strong positive driving factors at the moment, around billions of pounds being spent on infrastructure, really strong job growth. Net migration in the UK is very strong to the north, away from London. I think that’s being driven by affordability. A young professional in London, it’s almost impossible for them to buy their own home. Especially when they’re first starting out. They might have 300,000 pounds to spend on a property. You can’t buy anything in London for that, really. You can go to the city center in any of those cities I’ve just mentioned and buy a penthouse apartment and live for probably three quarters of the living cost.
So, for that person it kind of makes sense. That’s not only being reflected in individual preferences, but also a lot of major businesses are moving significant amounts of their workforce to their areas, like HSBC to Birmingham and a range of other major companies. So, so far as locations go, I would say that the areas with the most positive potential over the next five to ten years are those three cities, Birmingham, Manchester, Liverpool. The property prices are a lot lower, the yields are a lot higher. There’s a lot more room for growth there, within affordability ranges. Don’t just buy anything there. Buy the right properties in the right areas. But, from my perspective, I think those areas have the most going for them at this point in time.
Lucia France: In terms of things like transport links as well. They have lots of change going on in here. I know coming from Birmingham to this particular area where we’re filming today-
Paul Mahoney: Yes, you’ve got HS2, which goes into Birmingham. That will make a massive difference. 45 minutes into London from Birmingham when that’s done. I believe it’s due for completion 2026. That goes all the way through to Crewe, which is only 20 minutes to both Manchester and Liverpool. And then, you’ll have HS3, which goes through Manchester to Leeds. That will really open up transport links and the ability to do business across all of those cities. But, that’s just one example of the whole northern powerhouse scheme which is aimed at better utilizing the northern cities.
Lucia France: Great stuff. Thank you very much, Paul.