Could Leeds and Manchester be the new Seattle for property investors?
We recognised long ago the advantage of investing in property in locations that benefit from recognition as high-tech towns. ‘Internet hubs’, such as London, attract buyers who are willing to pay a premium for off-plan property that benefits from high-speed broadband access. New research shows that property investment in UK locations considered as high-tech hubs is producing higher-than-average returns.
In this article, we explain why you could make more money by buying property in high-tech hubs, and where the greatest potential may be.
Property investment lessons from America
When you think of high tech, you think of America. Silicon Valley, and all that. Perhaps we should look at how high-tech areas (locations where there is an abundance of high-tech employers) have performed to measure the potential effect on UK property investment. We think you’ll be surprised by the difference that investing in a high-tech hub could have on property investment profits.
For example, when it comes to property fundamentals, one of the most important factors is the potential for new employment. If there are no jobs in an area, who will want to live there? Between 2010 and 2015, 30% of all new jobs in San Francisco was created by the tech industry. High tech sucks in high-grade employees, and these command higher wages.
In San Francisco, Apple employees paid around $150,000 more for a property in 2010 than other San Franciscans. By 2015, this had increased to $400,000. The average wage of employees in the tech industry there was almost $125,000 in 2015 – two-thirds more than the city average of $75,604.
In Seattle, house prices are rocketing. The median house price there is now more than $700,000. That’s doubled in five years, and up by around 10% in the last year alone. Seattle property investors are benefiting from a shortage of housing stock, and a rapidly growing tech sector that is boosting jobs and population growth.
This pattern of growth in property values isn’t limited to the United States. If we look at the UK, we are witnessing the green shoots of property values being driven by the boom in high-tech.
High-tech property heaven started in London but is rippling outward
London is well known as the high-tech capital of the UK, and one of the world’s pre-eminent high-tech centres. But we are witnessing a rippling of high tech out to regional cities and towns. Of course, not all the growth in property values in London in recent years can be attributed to the boom in high-tech job numbers there, but it has certainly been a contributory factor.
Businesses that set up in London must accept they will be paying higher business rates and office rents. Wage bills are far higher, too. Workers need to earn more to support a higher cost of living and property prices that average around £481,000. Businesses setting up elsewhere don’t suffer these disadvantages.
Take Cambridge, Reading and Oxford as examples. All locations that benefit from access to the highly qualified workforce high-tech companies crave. All locations that are now established as digital hubs. In fact, these three locations alone are home to more than 100,000 high-tech jobs. Since 2012, as their high-tech economies have grown, property values in these three locations have surged: up by 43% in Oxford and Cambridge, and 54% in Reading. Compare these growth rates to the 31% average across the UK.
What do high-tech companies look for when deciding on location?
Several factors encourage inward investment by high-tech companies. Chief among these are:
- Access to a highly-educated workforce
- More affordable property prices for workers
- An infrastructure to support a growing population and rapid local economic growth
Find locations with this combination (and, of course, the other property fundamentals of shops, schools, transport links, major employers and major investment), and you may just find the best places to invest in property UK right now. It is what property investors in Seattle experienced.
Could Manchester and Leeds be the UK’s Seattle?
Recent research by online estate agents HouseSimple examined 30 digital tech hubs, ranking each by average property prices, number of high-tech jobs, and the potential for the high-tech sector to grow locally. London ranked at number 19.
The analysis placed Manchester top of the pile. There, the average house price is around £162,000. There are already 60,000 high-tech jobs, and the report gives the high-tech sector an 85% growth potential score.
Leeds was placed third. It’s average house price of £171,000 is higher than Manchester’s, but so too is the high-tech sector growth potential (at 92%).
Sandwiched between Manchester and Leeds is Glasgow, where the average house price is less than £120,000 and the high-tech sector has a growth potential of 81%.
Where are high-tech companies investing in the UK?
Mega deals like the one that has secured new jobs from Amazon and Google’s London HQ plans may grab the headlines, but look a little deeper, and you’ll discover that the regions are grabbing real high-tech investment. According to the latest report from Tech Nation, 68% of all UK digital investment was made in regional high-tech hubs and not in London in 2016. There is no reason we can see to expect this trend to change.
Where are the best high-tech hub opportunities for property investors?
Over the next few years, we could see regional high-tech hubs boom. But this doesn’t mean that all of today’s top digital locations will be equally hot for property investment. The secret is to uncover the ones that are positioned to take maximum advantage of the massive investment into high-tech – so look for those that offer the best job opportunities and have the infrastructure to provide the best quality of life.
If you want to know where you could benefit from the potential of property investment in high-tech hub locations, contact one of the Gladfish team on +44 (0)207 923 6100.
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