11: South West England Property Investment Update
08-28-2004
South-West England Investment Update
Prices in the UK West Country have risen some 100% in the last few years. The objective of this Special Report is to take stock on the price rises, update investors on recent developments and give guidance on how the market might develop in the next few years.
There have been some interesting developments in the last few months, which will affect demand and capital value increase in the future - I have outlined these below:
Newquay Airport Uncertainty: Defence cuts mean that in 1-2 years St Mawgan airport will no longer be a major centre for Royal Air Force, although their might be more minimal operations or a care and maintenance basis – this has put a question mark over the future long term economic viability of the airport – airlines such as Ryanair have been used to sharing the running costs to provide economic flights to Newquay/Cornwall for the last few years. The services were initially considered successful, though it’s difficult to gauge whether the services are economic for the airlines at the present time. There is some uncertainty and speculation that the airlines might stop flights to the airport – some people have muted that European Objective One funding could be applied for, to keep the airport open for airline passengers - this uncertainty will likely rumble on for some time.
High Speed Rail to Plymouth: On December 13th 2004, a new high speed electric train service from Plymouth to London is being launched which cuts travel time to 3 hours (2 hours from Exeter), speeding passengers at up to 125 mph. A service leaving at 6 am from Plymouth will whisk travellers and telecommuters to London by 9 am, in time for meetings at 10 am. This should make occasional commuting to London more feasible from east Cornwall and south Devon which could support house prices in the future.
A303 Improvement – Renewed Uncertainty: Plans for the dual carriageway building of remaining single lane sections of the A303 from Honiton in east Devon to Andover in Wiltshire has been put on hold at the end of August – Devon council had submitted their long term strategic plan for the transport in the county – these have not been given support by John Prescott’s Transport Ministry. This hold up and uncertainty is not benefiting business, communications or tourism in the south-west. The road link is deemed of the highest priority by business leaders in the south-west and the future of funding has know been thrown into renewed doubt.
Rich Stein pulls out of Newquay: In the Spring of 2004, Rich Stein announced he was pulling out of a large fish restaurant and hotel business venture in Newquay because of budget overruns – the original cost estimate had more than tripled, increasing the risks. A knock on positive impact of this project was expected – investors had already started buying property in Newquay end 2003. Whilst the Newquay surfing craze shows no signs of easing, the town is now unlikely to benefit from any celebrity or culinary potential that Rich Stein might have given (vis-à-vis Padstow). Meanwhile, some summer “lagers louts” have given the town some negative publicity recently, though this should be short-lived.
Flooding and Wet August Weather: The weather in August was the wettest on record – flooding in Boscastle (and Crackington Haven) was top national news and this seems to have dampened the normal enthusiasm for Cornish holidays and possibly second homes during the normally vibrant August holiday period. Many people decided to either cut their holidays short or head overseas to sunnier climbs such as Spain. The longer term impact of the bad weather is likely to be marginal, though good weather will always increase the popularity of West Country second homes as well as the region for re-locating to from SE England, Midlands and the North.
London and SE England Ripple Effect: Now that prices are now coming down in SE England, this is likely to quickly ripple through to South-West England casting some considerable doubt on whether capital value increases will be experienced in the next six months. The normal strong summer market came to a premature end in July – most agents now think it will not rise again significantly until Spring next year at the earliest.
Longer Term Trends: Long term socio-economic developments are quite good for South-West England. Many wealthy and successful people from SE England, London and more northern areas will likely decamp to the region as telecommuting, good schools, the scenery and warm winter weather make the area increasingly desirable. Meanwhile, the baby-boomer retiring will swell numbers – few houses are being built and the area should become increasingly desirable, particularly if communications improve (e.g. A303 and airports). However, in the short term, the market has gone quiet – I would not expect to see much movement in the next six months.
Oil and Energy Prices: Oil prices rose to 49$/bbl mid August, before dropping back to 43$/bbl end August. Petrol, energy and heating oil prices are rising – this can economically harm south-west England since trade is so reliant on road transport and tourists travelling from other parts of the UK. Whilst the situation is not bad yet, the region is exposed more than most to high future energy and oil prices – something that needs to be bourn in mind when investing in property in south-west England.
Possible Investment Options: The area I most like for investment is year round holiday lets in Dorset – with good access for long weekender from London, and higher sustainable rental incomes. Any large property with sea views and high rental income that can be converted to flats one day in seaside towns and villages is another good option. Property with potential to gain planning permission for expansion or upgrade or further building is also desirable. Plymouth is relatively low cost – the most desirable areas of this city are likely to do will in the future and the docklands area is worth a particular look. Look hard for purchases now since risks are higher because prices have flattened recently. In summary – do not rush in, take your time, look at many properties and you might find the quiet market benefits you since their will be some good deals out there and less competition. Also, be prepared for a scenario that prices drop by 15-20% sometime in the next year.
PropertyInvesting.net Aug 28th 2004.