By Reece Mennie, CEO of HJ Collection
As 2021 draws to a close, it’s worth reflecting on the remarkable changes in property value that have occurred across the last year – and, naturally, the canny investor will want to carry that spirit of analysis through to their considerations of the year to come.
There’s no question that, in broad terms, property prices have seen considerable spikes in recent times. By the same token, investors who have kept to their ears to the ground have doubtless been rewarded for paying attention to the shifts and changes that came hand-in-hand with the unprecedented circumstances of the pandemic.
The extent of these changes can be felt in data from the Land Registry’s UK House Price Index, whose August figures show that the average price of a property rose by 10.6 per cent year-on-year. This is a notably high figure, even when allowing for the extra incentive of the stamp duty holiday.
Of course, it’s worth noting that bodies including the Office for Budget Responsibility have predicted a certain amount of deceleration in terms of annual house price rises – down to 3.2 per cent in 2022 compared with 8.6 in 2021, in fact.
This doesn’t mean that we need to take a pessimistic view of next year’s investment opportunities. Instead, this kind of forecast highlights the value of looking with a keen eye for the prospective hotspots of tomorrow, taking a selective attitude towards the areas that show potential for a strong ROI.
With that in mind, it’s well worth thinking about the regions that excelled in the past year and using those observations to inform our places to watch for the year ahead.
2021 retrospective – the hotspots of the past year
According to Hampton’s, it’s likely that – by the conclusion of 2021 – the UK will have seen more houses sold than any year since 2007.
Taking this broadly strong performance as a given, then, the question becomes: what were some of the hotspots of 2021?
It’s been well reported that one of the more unexpected consequences of the pandemic has been the so-called ‘race for space,’ whereby many city dwellers have re-evaluated the size and locations of their properties.
There were – and remain – two considerations at play here: a lessened need to be near the office in a world of remote or hybrid working, and a desire for bigger properties in the wake of lockdowns and similar social restrictions.
In short: bigger properties in nicer areas have been the watchword of 2021.
This phenomenon explains why Essex and Suffolk have qualified as property hotspots in the past year, with record house price rises reaching heights of 15 per cent in some areas. According to Karl Manning, head of residential at Savills Chelmsford, this is due to Essex and Suffolk’s “coastal market” which has been particularly popular as people look to improve their quality of life in the ‘race for space’.
2021 has also seen a continued rise in (property) prominence around the north of England, a region whose historically low property values have left its cities with room for a considerable amount of growth.
Research from estate agents Andrews Property Group has noted the effects of this growth: according to their figures, Liverpool’s house prices rose 16.7 per cent between the start of lockdown and mid-2021, while the number of property transactions – whether purchasing or selling – grew to almost double pre-pandemic levels.
Clearly, 2021’s property hotspots – the areas in which investors have no doubt seen favourable returns – have been characterised by pandemic-related decision making, which has been compounded in those areas with room for growth – and these are lessons which can be applied to any forecasts regarding 2022.
Looking forward – hotspots for 2022
Inevitably, there is going to be some overlap between the hotspots of 2021 and 2022 – and, just as Liverpool can be seen as an example of the ‘race for space’ at work, other parts of northern England are likely to see continued growth.
Returning to Hampton’s recent research, the real estate provider has predicted that the north-east of England is likely to continue seeing substantial growth in property value, with prices set to rise between 4 and 6 per cent – not only in 2022, in fact, but in the two years beyond.
Consequently, when considering prospective investment hotspots in the next year, this broad region is a good one to focus on – particularly when combined with forthcoming acts of local investment that may prove to increase property values still further.
We’re seeing a number of such developments in the Yorkshire region due to the government’s £200m Community Renewal Fund, with the local economy set to be boosted by a carbon-negative energy system which has seen an investment of £768, 876.
Similarly, continuing on the theme of renewable energy as a platform for local economic growth, the Humber region is going to create an estimated 7,000 jobs as part of its new Freeport, which will host a number of green energy facilities in what has been described as a moment of “economic rebirth.”
Taking a broader view, according to data from the recent Digital Connectivity Index combined with research from Cambridge Analytica and Virgin Media O2, Yorkshire could benefit from the latter’s planned investment in digital infrastructure to the tune of over 42,000 jobs by 2026. This would boost the local economy by over £4bn and, by extension, offer a substantial opportunity for investors with their ears to the ground and their eyes on the horizon.
Recognising the lessons of 2021, a year in which pandemic-based changes began to unlock a new era of growth in key northern regions, allows us to see a huge amount of potential in the north of England as a property investment hotspot as we move into the new year and all the opportunities that come with it.