As a property investment platform, one of the questions we are asked more than almost any other is where investors should be buying property today. Should you focus on London and the South East, where house prices have historically delivered exceptional long-term growth? Or should you look further north, where property is often considerably cheaper and rental yields can be significantly higher?
It is an understandable question because, over the past few years, the gap between the North and South has become one of the defining themes of the UK property market. Rising interest rates have exposed the affordability challenges facing many southern buyers, while a number of northern cities have continued to attract investment, regeneration and population growth. Read the headlines and it is easy to conclude that one half of the country must represent a better investment than the other.
In reality, property investing is rarely that straightforward. Investors who have been in the market for long enough will know that yesterday’s best-performing region is not always tomorrow’s winner. Rather than asking which part of the country is “best”, it is often more useful to understand why different regions perform differently and how investors can position themselves to benefit from both.
The South: A Proven Record of Long-Term Growth
There is a good reason why London and the South East have dominated conversations about property investment for decades. These regions benefit from some of the strongest economic fundamentals in the country. Higher average wages, a diverse employment base, world-leading universities, and a chronic shortage of housing have all contributed to remarkable house price growth over the past thirty years. For many investors, particularly those with a long investment horizon, this track record remains extremely attractive.
However, success creates its own challenges. As property prices have risen much faster than earnings, affordability has become increasingly stretched. Buyers now require much larger mortgages than they did a decade ago, making southern markets far more sensitive to changes in interest rates. When borrowing becomes more expensive, fewer people can afford to buy, and that naturally places downward pressure on prices. Rental yields also tend to be lower than elsewhere in the country, meaning investors often rely more heavily on future capital appreciation to generate attractive overall returns.
None of this suggests that investing in the South is no longer sensible. Rather, it demonstrates that the balance between risk and reward has changed. Investors today need to be more selective than during the prolonged period of ultra-low interest rates.
Why the North Has Captured Investors’ Attention
At the same time, northern England has steadily moved into the spotlight. Cities such as Manchester, Leeds, Liverpool, Sheffield and Newcastle have benefited from significant regeneration, expanding universities, growing technology sectors and increasing private rental demand. Because purchase prices remain considerably lower than in much of the South, investors are often able to achieve stronger rental yields while committing less capital.
This has naturally attracted investors looking to generate income rather than relying solely on house price growth. Higher rental yields can provide an important cushion during periods when property values move sideways, making northern investments particularly appealing in today’s economic environment.
Yet higher yields should never be confused with lower risk. Some northern towns have struggled to achieve the same level of long-term capital appreciation as London and the South East, and economic performance varies enormously between neighbouring locations. Buying property simply because it offers an attractive headline yield can be just as dangerous as buying an expensive property solely because prices have always risen in the past. As always in property, location, tenant demand and local economic fundamentals remain crucial.
Perhaps We’re Asking the Wrong Question
The debate over whether the North or South is the better investment assumes that investors must choose one over the other. In reality, that is often a false choice.
Professional investors rarely build portfolios based on a single prediction about one region outperforming. Markets move in cycles. Government policy changes. Infrastructure investment reshapes local economies. Employment trends evolve, and demographics shift over time. Trying to predict which part of the country will outperform over the next decade is extremely difficult, even for experienced professionals.
Instead, many investors focus on something they can control: diversification.
Just as few people would invest their entire pension in a single company, concentrating an entire property portfolio in one town or city introduces unnecessary risk. A local employer could close, new housing supply could increase, or demand could weaken for reasons that are impossible to predict today. Diversifying across different regions helps reduce that concentration risk and allows investors to benefit from opportunities wherever they arise.
Could Future Property Taxes Change the Equation?
Geography is not the only uncertainty property investors face. Politics has the potential to reshape the market too. With housing affordability high on the political agenda, there is growing debate about whether the UK’s property tax system should be reformed. While nothing has been announced, proposals ranging from the abolition of Stamp Duty to the introduction of an annual property or land value tax have become part of the national conversation.
If Stamp Duty were significantly reduced or abolished, the impact could be substantial. Buying and selling property would become cheaper, making it easier for people to move home and reducing one of the biggest barriers to transactions. That could increase market activity, particularly in higher-value areas where Stamp Duty bills can easily reach tens of thousands of pounds.
However, many of the same proposals also involve replacing Stamp Duty with some form of annual property or land value tax. While the detail would ultimately determine the winners and losers, it is difficult to imagine that lower-value residential properties would be affected to the same extent as high-value homes. An annual tax linked to property value would, by its nature, impose a larger financial burden on more expensive assets, potentially narrowing their relative investment appeal.
Affordable residential property has traditionally been driven by different fundamentals to prime property. Demand tends to come from owner-occupiers, housing providers and genuine local housing need rather than international capital or luxury buyers. If future governments were to move away from one-off transaction taxes towards ongoing property taxation, these more affordable parts of the market could prove relatively more resilient, although the eventual impact would depend entirely on how any reforms were designed and implemented.
Tax policy, planning reform and housing regulation will continue to evolve and it is impossible to predict future Budgets or election manifestos. Rather than attempting to second-guess political decisions, many experienced investors prefer to build portfolios around long-term fundamentals such as affordability, genuine housing demand and diversification across different regions and property types.
Looking Beyond Geography
There is another important consideration that is often overlooked. Not all property investments are driven by exactly the same factors.
Traditional buy-to-let properties often depend heavily on local employment, house prices and private rental demand. Supported living is different. While location still matters enormously, demand is also underpinned by long-term demographic trends, an acute shortage of specialist accommodation and increasing government emphasis on helping vulnerable adults live independently within their communities.
This means the investment case extends beyond simply trying to identify the next property hotspot. The underlying demand is driven by social need as well as local housing markets, creating a different set of long-term fundamentals that many investors find attractive.
The Value of Diversification
Historically, building a geographically diversified property portfolio required significant wealth. Purchasing multiple properties across different parts of England was simply beyond the reach of most investors.
Today, that is no longer the case. Through Housemartin, investors can build a portfolio with exposure to supported living properties located across England without committing all of their capital to a single property or one local market. Rather than trying to predict whether Manchester will outperform London, or whether the South West will outperform Yorkshire, investors can spread their investments across multiple regions and multiple properties, reducing concentration risk while participating in the long-term demand for specialist housing.
The North versus South debate will no doubt continue, and both regions will almost certainly enjoy periods when they outperform the other. But perhaps the more important lesson is that successful investing is rarely about finding one perfect location. It is about building a resilient portfolio that is capable of performing through different economic cycles.
In the end, diversification may prove to be a better investment strategy than trying to win the North versus South argument.
Join Housemartin today to start building a diversified property portfolio and earn yields of over 7.5%.