Welcome to June, and whilst the market as a whole isn’t feeling particularly summary or cheery at the moment, particularly for those of us with leverage that’s anything to do with the base rate, you’ll know that I’ve said many times before that we need to be cautious with aggregate statistics. ‘The market’ is particularly relevant if you are buying into indirect funds that track the entire UK property market - otherwise, what’s going on in your local area is more likely to be more relevant.

Those who have read (or listened) to much of my content before will know that I’m relatively geographically agnostic. The extra hassle, and cost, of managing assets from further afield, can often be more than compensated for by the fact that it is easier to buy well, or at least more intelligently, in certain parts of the country - and I’ve not been averse to attempting to pick areas that I think might be future (or current, early stage) hotspots in terms of capital growth too. A lot of people fell into the trap that because London outperformed quite so dramatically, relatively soon after the 2008 financial crisis, that it meant London was the only place where dramatic capital growth
would happen.

Indeed, come 2015, it was obvious that the reverse of this was likely the case, to me anyway. The pace of growth was utterly unsustainable - with some boroughs up over 20% year on year for a couple of those years between 2010 and 2015, and sealed bids being commonplace. Sealed bids are one of the great ‘front-line’ markers of an overheated market. This then came to pass - the average UK house is 50% higher than its January 2015 price according to the most recent UK House Price Index produced by the Office for National Statistics, but London is up 30% since then. The East Midlands - which has been my preferred investment area over that timescale - by comparison, is up 60%.

Now is the time, however, to consider just how permanent that trend can be. Why? Well, apart from anything else, there is some breathing space to do exactly that piece of work, robustly, whilst the market licks its potential wounds from base rates heading to 5% and beyond. Things take time in property - as we should know - and this is the time to take a breath, at least for a few weeks, whilst lenders and vendors work out exactly what their strategies will be.

At a high level, the same logic could be applied. We have had, as already mentioned, massive rises in capital growth in the East Midlands, and at some point the party will come to a close, by the same logic as it previously did in London. The counter positions to this include that these rises were somewhat more sustainable, and also that it is possible to outperform in a region if growth continues to progress at a higher rate in one more than the other; anti-London arguments could include the remote working boom impact since the pandemic, for example.