HS2: What Does It Mean For Property Investment?
With the construction of the HS2 well underway, many are questioning what impact the rail project will have on the property investment sector.
Ultimately, major improvements in transport in an area will correlate with house price growth. This is because the area becomes much more attractive. But which areas will benefit from the HS2 and see the biggest property price growth? In turn, what impact will the HS2 have on property investment?
What is the HS2?
The HS2 is the second phase of the UK’s high-speed rail network – a huge infrastructure project that has been an important player in creating the “Northern Powerhouse”. It promises to transform train connectivity between the north and south. Forming a Y from London, it will travel to Birmingham, before dividing north-west to Manchester, and north-east to Leeds. As a result, it will connect the six big cities in the north: Liverpool, Manchester, Sheffield, Newcastle, Leeds, and Hull. It will also significantly reduce travel times to London.
This is a massive infrastructure project — a £56 billion-plus investment in rail, road, and regeneration. Connecting London to Birmingham, the first phase is scheduled to be finished in 2026. The second phase, connecting the northern cities will follow in 2032. On top of this, the Prime Minister has said the project will create 22,000 jobs. The railway connects eight of Britain’s ten largest cities which amounts to 30 million people – almost half of the UK’s population. When it’s fully built, it will transport 300,000 passengers a day. The HS2 will help rebalance the British economy – especially between the North and South. We can expect to see house prices rise across the North as a result.
How much will house prices increase?
Major transport improvements will undoubtedly increase the attractiveness area. In turn, increasing house prices. However, how the HS2 will affect house prices varies from area to area. The Crossrail in London is a great example of how transport infrastructure projects have affected house prices. The Guardian provided an analysis of the impact of transport regeneration on house prices. Drawing comparisons from the Crossrail experience, they predicted properties within a 10–15-minute walk of the HS2 could see a 30-60% increase once completed.
Of course, we will not be able to know for certain until completion. COVID-19 has had an impact on buyer trends meaning many are looking to move out of the city. Buyer trends are likely to change again by the time the HS2 is completed. According to Knight Frank, the ‘HS2 Effect’ has resulted in a 14% increase in house prices in just two years. In terms of property investment, those who invest now should expect significant price increases in the coming years when HS2 comes to fruition.
Which areas will see the most house-price increase?
Birmingham is the first location on track to benefit from the new HS2, as several big regeneration projects are underway. A number of major businesses have chosen to locate to Birmingham in recent months such as PwC, BB3, Goldman Sachs and BT. Many investors have identified HS2 as the primary reason for these relocations. The current rail time from Birmingham to London is 100 minutes, but this is set to halve with the introduction of the HS2. As a result, Birmingham can expect to see a further increase in the area, following what has already been a successful decade of growth.
House prices in Manchester are already growing at twice the national average. This is because Manchester is well-known for being an attractive place to live, with modern inner-city apartments, and detached homes on sale for a fraction of London prices. Manchester is already competing with some of the biggest cities in the world. With the promise of improved accessibility (cutting the journey time from London to one hour and eight minutes), property values in the region are projected to climb even more. For both property investors and homeowners, the sooner you invest in the city, the more likely you are to profit from rising housing prices as the HS2 project moves forward.
Leeds is already a huge financial and legal hub. As one of Yorkshire’s biggest cities, it’s sure to be one of the Northern Powerhouses that benefits the most. In the next five years, house prices are expected to rise by 10%. Also, with the huge investment into the South-Bank project, Leeds is set to skyrocket in growth.
The HS2 promises increased accessibility. As a result, more people will opt to move to areas with access to the railway. Increased demand for housing means we can expect to see prices climb, making it an appealing choice for property investment. The sooner homeowners and property investors invest in the city, the more likely they are to enjoy capital growth as the HS2 programme is completed.
The proposals also involve enhancements to existing railway lines. Meaning even more remote cities are projected to benefit from HS2. Therefore, it would also be worth looking at areas that are within convenient travel distance of the new line. Especially if you are looking to buy outside of the city, these areas will still see a price increase.
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