As a general principle higher yielding properties, which are better for income, tend to be cheaper properties, and the highest yielding can be cheap properties in cheap areas.
Conversely properties that are more likely to benefit from capital appreciation are higher value properties, and those that are more likely to appreciate are higher value properties in better areas.
According to Nationwide in 2012, in terms of property values:
England outperformed the rest of the UK with values decreasing by an average of 0.4% in the year. Wales was second with minus 2.7%, Scotland with minus 3.3% and then Northern Ireland minus 8.2%.
Within England only London and the South west had house price growth during the year with plus 0.7% and plus 0.2% respectively.
Within England Yorkshire and Humberside was the worst performing region with minus 2.5%.
“With the exception of East Anglia the South of England and the Midlands outperformed the north of England. Within England , the North/South divide in property prices continued to widen, with the price of a typical home in the South now around £95,000 more than in the North, a new high and around 2% more than at the close of 2011”.
Halifax research also highlighted another trend, that City house prices have outperformed the UK average over the past decade.
They report that:
- the majority of cities (67%) have outperformed their region in terms of house price growth since 2002;
- cities have done well in relative terms since the housing market peaked in 2007, recording an average fall of 17% compared with the UK average decline of 23%;
- house prices in towns that have become cities since 2000 have, on average, outperformed the country as a whole with prices in cities increasing by an average of 38% from £125,276 in 2002 to £173,322 in 2012, exceeding the 29% rise for the UK as a whole.
House Price indices, such as those produced by Nationwide and Halifax, can be useful in identifying trends.
So, as a rough guide, we could conclude that the somewhat stereotypical view that one should buy in the north for yield and in London and the south for capital value still holds true.
Also that buying in major cities makes more sense than buying in smaller towns or rural locations.
However, as indices deal with ‘averages’ it’s also true that in any region half of the properties will perform better than the average and half will perform worse.
As a result we can conclude that although we use our general guide as a starting point to decide where to buy, the truth is that there will be suitable deals in every location, as long as we are prepared to put the time into finding them and, just as importantly, negotiating the best price.