HS2: The Essential Property Investors Guide 04/01/22

Property investors should know, HS2 is a high-speed rail network which has been in the planning stages for years but is still yet to be started. As time has gone on, the estimated cost of this network has trebled to a staggering £106 billion.The question on your mind might be: Why does a faster network have any concern with property investors?  Well if the plan does go ahead (which is growing more and more likely to gain PM BorisJohnsons approval), if you happen to find a property investment at the right place and right time you could be in for some lucrative dividends.

What is HS2?

This is a high-speed rail network that intends to link the midlands and the Northern Powerhouse with London. Whether it's by road or rail, currently, the routes are overly congested which brings inevitable delays for travellers. The cause of this overcapacity on the roads is simply that there have been no new rail lines built since 1900 as well as there being very little room to expand the motorways. For the vast majority of passengers travelling via train, the prospect of being seated during their journey is unlikely and often there are corridors lined with passengers.

Another reason for the HS2 to be approved is the rebalancing of the British economy. It's common knowledge that prices in the south have inflated drastically over the last 20 years and for many years the north has been tracing behind. However, the emergence of the Northern Powerhouse shows real potential for the economy to spread from the south through the midlands all the way up to the north. A key component of this wide scale NorthernPowerhouse project has always been to build high speed rail networks to close the north-south divide.  

How long would it take to build?

The reason this has taken so long to gain concrete approval and finally begin construction is the sheer size of the task at hand. These HS2 trains will be serving over 25 stations, spanning all the way from Scotland to the South East, covering 8 out of 10 of Britain’s largest cities. This is why there will be two huge phases to HS2. Phase one will be railways from London toBirmingham, which are scheduled to be completed by 2028. This stretch will cover a number of stations including Old Oak Common linking to Paddington, Crossrail and the Heathrow Express. It is also speculated for it to link into the London Underground, which would then reach all the way to the South ofEngland, Wales and the South-west.

Then the second phase is the considerably more crucial segment for property investors. This stage will turn part of the railway line into two sections, one way to Manchester and the other to Leeds. The final stage in itself will be split into stages, which are all scheduled to be completed by 2035. When all of the tracks have been laid down and are finally operating, there are further plans for there to be other lines off to Liverpool, Newcastle and Scotland.

Which areas will face the most economy/property growth?

This investment has the potential to provide a general uplift in the economies of Midlands and northern cities. The most recent data for GVA per head; London is currently earning £43,500 per person, in contrast to cities within the Northern Powerhouse being significantly lower. Leeds earning £27,500 per head, Liverpool at £23,000, Birmingham at £22,000, andManchester at £21,000.

HS2 promises to be instrumental to the further development of the Northern Powerhouse which encompasses around 15 million people, the core of it being Liverpool, Manchester, and Leeds. These cities house a large number of students, many of which will then move to the south for the overflowing earnings they can potentially make.

However, with this initiative, the hope is that many of these students will choose to start and develop their careers up in the north which will boost the overall property market due to increased earnings and demand. Workers may be encouraged by the development of manufacturing, science, technology, and service sectors where there will be significantly more working opportunities. Thus, within these cities making up the Northern Powerhouse there will be more of a rental demand for city centre apartments and studios.

In the two Northern giants, Liverpool and Manchester, the property investment market is already on the rise and has become an increasingly popular destination for investors. This has caused a significant rise in property prices by 6% since 2017. Taking these figures and the HS2 plans, investors are going to be queuing to jump on properties in not only Liverpool and Manchester, but also Sheffield and Leeds. It's safe to say the future is looking bright for property investment in the north, as there is a huge capacity for growth.

On top of all of this, there is another reason for why this project is only going to be beneficial to the property market in the NorthernPowerhouse. It shouldn’t be news to any property investors that property prices become more and more inflated the further south you go. The average price of a property in Cambridge is £511,000, meanwhile the typical price of a property inManchester is just under £190,000 or even £157,000 in Liverpool. The point is, many workers based down South may choose to pay a fraction of the price and purchase/rent within a northern city giant like Manchester, with their commute being just 49 minutes via high speed rail. As previously mentioned, London is currently earning £43,500 per person and so these workers will be investing more into the north which will drive up the property prices in these regions.The extent to the potential capital appreciation and rising rental yields over15-20 years is something investors can’t pass up!

Remember: Right place, right time!