Why East Midlands property prices are thriving
Roxana Mohammadian-Molina is chief strategy officer at Blend Network
According to the Nationwide House Price Index, East Midlands was the UK region with the strongest house price growth in Q4 2020. It saw an astonishing 8.6% year-on-year growth. This followed a vigorous 4% year-on-year growth in Q3 and a resilient 1.5% year-on-year growth in Q2, amid an unprecedented pandemic and closure of the housing market.
But the East Midlands has displayed consistently strong housing price growth over recent years. Indeed, the region has seen a 24% house price growth since before the Brexit referendum in Q1 2016.
Furthermore, houses prices across the East Midlands have been much less volatile than other regions such as London and its outer metropolitan area, the South East and the South West. For example, the standard deviation – a measure of volatility – for house prices across the East Midlands since the early 1970s is up to one-third less than the standard deviation for house prices across London.
According to Savills, the East Midlands has not experienced major peaks and troughs in house price values and demands compared with areas such as London and the South East. Thus, it is seen as a pretty resilient area from a national housebuilder perspective. According to PwC’s projections, the average house price in the East Midlands is estimated to rise from £190,000 in 2018 to around £214,000 by 2022. Similarly, KPMG predicts house price growth in the East Midlands to average 3.4% per year between 2018 and 2022, surpassing London which is expected to grow at an average rate of 1.5% per year during this period.
Overall, the East and West Midlands have been the two strongest UK regions since the Brexit referendum, and have seen close to 25% price increase between Q1 2016 and Q4 2020. The housing market in the East Midlands reflects the strength of the local economy and the Midlands as a region overall, reinforced by local infrastructure and connectivity, with billions being invested to improve roads, rail lines, schools and hospitals in the region.
These factors continue to be crucial drivers for house price growth and are likely to be reinforced by Prime Minister Boris Johnson’s £5bn ‘New Deal’ announced in June last year to build homes and infrastructure as a means to counter the economic shock of COVID-19, as well as the “most radical” changes to the planning system since WWII to help the country “build, build, build.”
But even before Johnson’s plan was announced, a number of towns and cities across the East Midlands were undergoing regeneration, deemed ‘up and coming’ and regularly included in the list of most desirable laces to live in England.
Following the COVID-19 pandemic and observed exodus from small city-centre flats to larger homes in the commuter belts, several cities and towns in the East Midlands have been selected as most desirable hotspots for London commuters. These factors have driven perceived attractiveness of the East Midlands.
We at Blend Network continue to see a large number of deals coming from the East and West Midlands, a region we like due to its lack of low-cost housing and pockets of strong growth. We recently agreed funding for a landmark project in the East Midlands: The Factory development, a £3,330,000 gross development value (GDV) brand new residential development in the heart of Northamptonshire to convert a beautiful former shoe factory in Wellingborough into 24 residential units in all, a mix of single and two-bedroom apartments.
Other projects funded by Blend Network across the Midlands include the conversion of a commercial unit into a multi-let mixed residential and commercial property in Worcester, the conversion of an office building in Stafford into 27 apartments and multiple HMO projects.
Figure 1: UK regional house prices (Index Q1 2015=100)
Source: Nationwide House Price Index, Blend Network