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Growing gaps may produce new buy-to-let clues

4th January 2008 | back to article listings BACK    print this article PRINT

Those looking at where the best opportunities may be in 2008 for investing in buy-to-let may have taken close notice of the latest Nationwide house price figures.

On the face of it, the final quarter statistics for 2007 appear fairly unremarkable. The period had a seasonally-adjusted figure of one per cent house price growth, not the decline that some might have expected but a fall on the 1.6 per cent from the third quarter. Such a number might be regarded as entirely in line with the lender's predictions for zero growth in 2008, with a fairly soft landing rather than a crash after the years of boom.

Perhaps more telling data was released alongside the quarterly figures. This showed the annual trends by region and by city, which indicated that there was a clear and growing geographical variation, perhaps as significant as the national trend and maybe of greater significance in 2008, when lower overall growth means investors will look at which regions are still enjoying good growth.

Three regions had double-figure growth - the usual suspects of Northern Ireland, London and Scotland with increases of 24.2 per cent, 12.8 per cent and 10.1 per cent respectively. In contrast, there were four regions with less than four per cent growth - the three northern English regions plus the east Midlands.

A survey of prices in cities - often a key area for buy-to-let accommodation shows the same regional trend. Belfast tops the price rise list, followed by Aberdeen and London, with the rest of the top five made up by Oxford and St Albans. In contrast to these hotspots it was cold up north, or at least in the north-east, where the three worst performers - Durham, Newcastle and Sunderland - were located. The east Midlands was represented by Nottingham, while Sheffield was fifth.

Of course, focusing on these cities ignores what may be happening in the main centres around Manchester, Leeds and Liverpool, but the pattern appears clear enough. While the data was compiled over the whole year, this week's Land Registry figures for November suggest this was still largely the picture in England at the end of the year. London had the highest price increases at 1.1 per cent while the only two areas to see no growth were the east Midlands at zero growth and the north-east with a 0.9 per cent fall. With the Nationwide survey indicating a 0.2 per cent decline in the Yorkshire and Humber region, the three regions represented by the five worst performing cities saw falls in one or other of the most recent surveys.

This may be considered to be relevant because if such annual trends remain fairly current they may give an indication of what to expect in the next few months. In such circumstances buy-to-let investors may decide to focus more on those areas where prices remain high and rising fastest, as these are the areas where affordability levels will be lowest and demand consequently highest.

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