Why you shouldn’t invest in London’s property market and invest in the East Midlands


“You will never spend someone else’s money as careful as you spend your own” – Milton Freidman.

To some of you, investing in property rather than a letting all your money sit in a bank account may seem blindingly obvious, but for others, it is understandable why you may be hesitant to invest into property. After all, there was a housing bust in 2008 which consequently had a negative effect on the economy on a world scale. Maybe you feel safer with it stashed away in the bank and gaining a slow, steady and sustainable interest? Maybe you’re just not interested in property? Don’t worry, these are certainly good choices to make. Unless you are not careful with your money then you’re not going to be losing your pounds sterling any time soon.

That being said, if you are interested in where to invest your money within the current property market then this article is for you. This article will break down the facts and explain all of the key economic benefits of investing your money into property. But where is the best place to invest Where is the worsy place to invest? Where will give you the best Return on Investment? How do you find a particular property to buy? And where will continue to be a sustainable investment into the future?

Recently within the 5 years there has been a seismic shift in the property market, with the massive jump in average house prices across the Midlands and a significant decline in within Londons property market. Buyers are quickly migrating their funds and making the journey from the south to the north. They are realising that they are loosing money in London and certain parts of the UK.

Lets have a look into the reasons why this is the case and explain why East Midlands property inparticular, is much more investable over London’s property market and why it yields a higher Return on Investment (ROI) and in some cases, a safer place for your money to be.

You might be new to property investing; alternatively, you may be a landlord or lady already involved with property development. Regardless, read on and get some easy tips and pointers for your future investments.

Current bank interest rates compared with Regional property rates

For most of us, the end goal is, once you get your money is: what the best place to put this money so that it will make a secure, steady interest over time? What is going to give you the best incentive and keep your money safe without the additional worry of its security and stability being compromised? Banks are certainly one safe way to do this.

Analysing current bank interest rates against regional property rates is a good place to start. Your bank will have various interest rates for different accounts, whether that’s an Instant Access Account, Cash ISA Account, Investment ISA or Fixed Rate Bond. Take a look at your own current or saving account and find out what your interest rates are. Generally, interest rates on savings accounts are between 2-3%. Lets take the median and do some maths.

Keeping things simple and say an investment is made of £100,000 into a savings account with a fixed yearly interest rate of 2.5%.

£100,000 x 0.025 = £2,500 per year interest.

After 5 Years = £112,50 0

After 10 Years = £125,000

Using the above example at a standard interest rate, you will make £25,000 in ten years. Not bad right?

Now lets take a look at what the East Midlands property market will currently offer you.

The Office for National statistics (https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/may2018 ) has recently published data in May 2018 of studies on house prices across the UK from January 2005. Take a look at the graph below illustrating the average house price increase between the decade of May 2008 and May 2018.

Figure 1 – Average UK house price, Jan 2005 to May 2018

(you may of notice the point where it takes a huge drop. This was the major housing bust in 2008. Since then you can see the steady rate of growth for the average UK house price). The graph makes for decent reading to those who have already seen a good steady increase of the last decade since they invested. Those smarter buyers would have purchased property just after the crash when the average prices were slashed!

Moving onto more specific areas of the UK, the chart below shows the 12 month percentage change per English region in property values. The East Midlands since 2015 has showed the highest annual growth, with prices increasing by 6.3% in the year between May 2017 to May 2018. This was followed by the West Midlands coming at an average increase of 5.0%. The study also concluded in the UK average house prices that “Detached houses showed the biggest increase, rising by 4.6% in the year to May 2018 to £344,000. The average price of flats and maisonettes were unchanged in the year to April 2018 (0.0%) at £203,000, the lowest annual growth of all property types”.

Figure 2 – All dwellings annual house price rates of change, year to May 2018, by English Region

Moving onto London, figures published on December 19th 2019 from HM Land Registry ‘UK Price House index England: October 2019(https://www.gov.uk/government/publications/uk-house-price-index-england-october-2019/uk-house-price-index-england-october-2019)  found that the annual price change in London significantly dropped.

An example of the large drop in London prices is evident in a house price comparison study taken from October 2018 and October 2019. The City of Westminster saw a decrease from average property price of £1,025,486 in Oct 2018 which decreased to to £966,268 in Oct 2019 with an overall decrease of -5.8%. Kensington and Chelsea took the hardest hit with an overall annual decrease of -11.2%! All while East midlands towns such as Mansfield which have seen an overall annual increase of 5.3%, the City of Nottingham has an increase of 3.0% and Leicester has had an increase of 4.1%.

It is worth noting that not all of the London boroughs decreased in property value. For example, the London Borough of Tower Hamlets increased by 5.2% due to large master planning schemes and apartment high rises constructed and still being constructed in the last decade in Canary Wharf and surrounding areas. This being said, the above chart shows that on balance the actual overall average annual decrease in London house prices is -0.4%.

Going back to the same 10 year example we used earlier, lets compare the average house price percentage in London to the East Midlands.


£100,000 x – 0.004 (-0.4%) = -£400 per year interest.

After 5 Years = £98,000

After 10 Years = £96,000

Total Reduction = -£4,000

East Midlands

£100,000 x 0.063 (6.3%) = £6,300 per year interest.

After 5 Years = £131,500

After 10 Years = £163,000

Total Increase = £63,000

The figures in the example above can’t be guaranteed as the average house prices will vary from specific location and investment (make sure you do your due-diligence when assessing potential properties), however on average it is quite a sobering figure!

If these average house prices remain at their percentages as is with the above example, you would be £38,000 better off investing in the right East midlands property than putting your money into a savings account at a fixed rate of 2.5%!

What’s more, you would be (on average) £67,000 pounds better off in ten years investing in the East Midlands rather than in a property in London! Crazy!

But why is this? This seems such a drastic change in the property market. London property was previously such a great place to invest! What went wrong?

What is it about the Midlands? Why the East and West Midlands are currently raining supreme in the property world.

What is the reason that the midlands giving such a healthy return on investment and such a high average house price increase?

The main factor effecting the price change is London’s saturated property market.  The government has a housing demand to satisfy. There is a scarce amount of housing in England (particularly in London). Scarcity put simply by Economist Dr. T. Sowell “what everybody wants adds up to more than there is”.

Within the recently elected conservative governments manifesto (https://assets-global.website-files.com/5da42e2cae7ebd3f8bde353c/5dda924905da587992a064ba_Conservative%202019%20Manifesto.pdf) the conservatives have vowed to deliver a minimum of 1,000,000 homes in the next 5 years. Meaning over 200,000 homes every year with a target of 300,000 homes of mixed tenure.

On the other hand, they have also said that they will protect all existing Greenbelt land and restrict any development or encroachment upon it. The National Planning Policy frame work outlines how planning permission can be possible on Greenbelt, as you can imagine – the policies are quite restrictive. The conservatives want to utilise any existing available Brownfield land rather than risk losing more greenbelt.

The problem is that London is surrounded by Greenbelt land and finding parcels of land which aren’t greenbelt and are freely available for development is rare! Therefore development in London is at crosshairs with each policy set by the government. This is one of the main reasons why London is aiming to build up and not out. This leads to one major outcome: to build the majority of these homes outside of London.

What’s so good about the midlands? If London is saturated, why not elsewhere in England? Surely its not just the midlands that can be used? To some extent this is true. But the geography of England can explain this. The midlands sits centrally in England, it has a great commuter belt and is accessible to all areas. With more train services to London, better transport services and growing communities it gets more prosperous year on year. Additionally, it has what London and other dense cities doesn’t have. Space.

This, in turn, has led house builders to make the most of this opportunity. Building more houses in the midlands, meaning more people in communities, more people means more services, more services means more shops and high streets, which means more jobs! This change requires scalable master planning schemes to accommodate for the new demographic, all of which leading to a positive shift in the local economy and desirable places for people to live.

This desirability and general improvements to standards of living is the reason that the East Midlands average house prices are on the rise.

Compared to London, the value for money for property in the midlands is laughable. For what renting a small flat share or HMO room gets you in London you can get you a 3 bedroom home in the Midlands. Ridiculous! This factor alone has driven people away from moving or staying in London, especially if there is more and more work available in the north.

How to find your potential East Midlands property

A 3 bed home for the same rent price of a small bedroom in a flat share doesn’t sound to bad. But how do you find it?! Nothing good can come overnight; you will need to do your research into the areas that are going to work for you.

Start to think about what areas or counties appeal, narrow that down to places in the midlands (East midlands if possible). Now start to do your research into those places, looking at distances to amenities, places to go, activities, local bars and restaurants, are there any large scale developments taking place nearby? Any master planning schemes? Any developer new build schemes in the area? Any new schools and parks? In short, all of the things that will make the place liveable. Think what is going to improve the quality and standard of living for potential residents. This will have an effect on the value of the property.

Once you have an idea of the area you want to invest in, the best way to start narrowing down and looking at figures is through property comparison sites such as; Zoopla, OnTheMarket, Rightmove etc. All of which have easy to navigate and user friendly websites which allow you to search for all properties in that place which are currently on the market. When you are on these sites it will ask you the find properties by doing the following; What postcode you want the property to be in, what is your furthest distance of properties you will be interested in away from this postcode (Eg up to 5 miles), What type of property you want (Detached, semi detached, terrace, flat etc), the amount of bedrooms and the price range. Have a look at the properties in the areas and start to shortlist them.

When you get your shortlisted properties, it’s important that your figures are going to work. This would be an ideal point to take some time to work out how you are going to fund it and whether you are going to need a mortgage on the property, if you can put more money down to pay less in the long run or buy the property out right.

There are several advantages to buying existing properties on the market. You might be able to find a bargain on auction or alternatively, buy an older property in need of some work which – once done up right – will give you even more of a return on your investment.

Another advantage is the potential to extend or convert. You could use your permitted development rights without getting planning permission to extend your property. More information on permitted development right can be found here but it also allows dormer roof extensions. Conversions available are flat conversions or HMOs (House in Multiple Occupation) which can see you making up to 20-30% even more value from renting individual rooms within your property (provided you meet the space requirements).

Seek an architect or specialist designer who will be able to make the most out of the internal space of the property possibly adding bedrooms and more desirable living spaces with interior design principles modernising the property.

All of this is subject to existing properties on the market, what if you want to buy a new build?

New builds also have their advantages. The main advantage is the fact that it is finished to modernised standard and won’t need any or much internal work. In some cases, where there are large home builders and developers, they will work with you to help you buy the freehold of the property. 5% down on a help-to-buy scheme is a popular option for young professionals. If you are a more experienced buyer or not a first time buyer then some of the properties will be for private landlords as well.

There are usually more planning restrictions on new build developments, but in balance will be part of a larger development scheme which will in time add more value as the new communities are built.

Both can be very good choices if you are potentially looking at buying properties in the East Midlands. However, is the East Midlands going to continue to rise as well as it has in the previous years? How sustainable will you investments be?

The future of the property market

The property market is looking bright for the midlands, not so much in London. There is always going to be an air of uncertainty until Brexit is finally done but it seems now that Boris Johnson is in the driving seat, we are on the last stretch to independence.

Quite a few developers and investors have been waiting for the decision on Brexit to where they stand on making their next investment.

Conclusion: Key pointers for you to take away.

So lets re-iterate the questions asked and answered. Where is the worst place to invest? Where will give you the best Return on Investment? How do you find a particular property to buy? And where will continue to be a sustainable investment into the future? After reading this post you should be confident in answering all of the above.

In conclusion, it is the right time for you to invest in the East Midlands property market, certainly within the foreseeable future while the properties are affordable and still rising in value. We have analysed and compared London to the East Midlands average house prices and discovered that Londons property market on average is decreasing and becoming un-investable.

What are the main things and key points for you to take away from this article;

  • The midlands has huge free land potential for home builders and developers
  • Try not to invest in London property (check the borough)
  • More and more homes are being built in the midlands.
  • Do your research into the highest house price growth rates for the area you want to invest in.
  • Try to stay away from flats and maisonettes. (Some flats can increase, so check first)
  • Invest in the East midlands while the house prices are affordable! Don’t delay!
  • Potentially covert your property into a HMO or extend your property to get the maximum yield.
  • Find out whether you want to buy a new build or existing property
  • Get expert advice to help you make the right choice.

There will be a renewed wealth from London up the commuter belt to the North of England and the East Midlands specifically to exploit the price gap. The east midlands are a goldmine ready for the taking. Take advantage while you still can!

This article was written by Adam Peter Philip Jones. Managing Director and Lead Architectural Designer of Peter Philip Developments Ltd who has had over 6 years of experience directly in Architecture and has a track record of working for architects and property developers in London and in the East Midlands, bringing first hand experience to the table when it comes to understanding development and what is required to make the right investment.

Leave a Reply

Your email address will not be published.

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed