As a property finder, I have, in the past, been tasked with helping clients find the best places to invest in. Below I outline why investors are shifting their attention to “lower value investment properties in… fringe areas of London and select regional markets”, such as Portsmouth.
Portsmouth, the next investment hotspot
The M27 corridor, including urban areas such as Portsmouth, Southampton, Fareham, Gosport, Eastleigh, is enjoying economic growth ahead of the national average. In 2016 PWC put Southampton 4th and Portsmouth 13th (out of 43) in its Good Growth City Index. The region is forecast to continue above average growth driven by the its tech, maritime and retail industries. As an example, Tech City reported that Southampton’s Tech industry saw sales growth of 180% from 2010 to 2014, the fastest rate of growth in the UK.
The demand side of the housing equation is strong, with the latest SHMA (Strategic Housing Market Assessment) stating that the local authorities along the M27 corridor need to build 4,000 homes per annum for the next five years. But the current known supply will fall some way short with approximately 3,000 houses expected to be completed annually.
With a strong economy and demand outstripping supply, external research has forecasted that house prices will rise 17% in the next 5 years, which is ahead of both UK (13%) and London (11%) forecasts.
Within the M27/South Coast area we would highlight Portsmouth as an investment hotspot. After a period of capital price underperformance, vs London and the South East, Portsmouth is beginning to outperform. Affordability in the city is relatively good at 8x average earnings, this compares to double that in sought after neighbouring regions, and an average of 11x across England. And the housing supply/demand imbalance will not be easily solved given the city’s coastal location. Two bed flats typically sell in the £140,000 to £240,000 range (prices can go significantly higher for flats with sea views).
Recent changes to mortgage affordability testing has increased investor focus on higher yield investments. Investors can achieve yields in Portsmouth of 6-7%, which is hard to match anywhere in the South of England.
But, why invest in Portsmouth?
The M27 corridor, and Portsmouth offers a very compelling investment case:
- A local economy that is growing stronger than the national average.
- A housing demand/supply imbalance.
- A left behind market that is due to catch up and is forecast to see price growth faster than UK and London.
- Extremely high rental yields (6-7%)
The south coast has another investment gem – Bournemouth – that I will feature in my next blog.