Earlier this week (beginning February 10th) Prime Minister Boris Johnson confirmed that HS2 will go ahead in full. This is big news for a multi-billion pound project that only a couple of weeks earlier looked destined for a write off. Albeit at an almost unreal cost (estimated at £307m per mile), HS2 is due to transform connectivity in the UK. Joining up with a separate project called Northern Powerhouse Rail, together these two infrastructure projects are set to revolutionise transport in the UK, especially in the north of England.
The ‘HS2 Effect’ is a term thrown around property investment circles referring to house price rises in those areas where HS2 is planned to pass through. For example, Birmingham saw a 14% house price rise in just two years according to Knight Frank. We’re expecting to see similar growth acceleration in other areas, particularly Leeds which is already set to benefit from projected 21.6% regional growth.
With that said, we’ve put together some essential information on the HS2 project in general.
So, what is HS2? Following the success of HS1 (better known as the Channel Tunnel rail link), HS2 (High Speed 2) is an ambitious and exciting project that will vastly improve connectivity throughout England. Rail-users will be able to traverse the country at speeds of up to 250mph, resulting in reduced travel times and more convenient routes. The first stage will see a direct service built between London and Birmingham, a journey that will drop from 1 hour 24 minutes to approximately 50 minutes, with estimated completion in 2026. This means that there is still time for property investors to get ahead of the market if they haven’t already, or become an early adopter for better returns.
After completion of phase one, the line will be extended further to reach Manchester (reducing the journey time from London to 1 hour and 8 minutes – a saving of one hour) and Leeds (with a new journey time of 1 hour 22 minutes from London – saving the traveler 50 minutes). This is planned to finish in 2032-33 and will link up with existing lines and railway improvements to spread its reach even further, including to Edinburgh and Glasgow in Scotland. The proposed Northern Powerhouse rail will run between Liverpool and Hull, and the Midlands Engine proposals will go between Coventry and Bristol. By the time that the whole project is done, it is expected that almost half of the UK population will have access to HS2 services.
This improved access is expected to stimulate mobility across the country, taking the focus away from the South and helping to distribute the wealth away from the capital. With the cost of property and general living costs being inflated in the current commuter belt, people working in London are having to move further out to areas that they can afford and enduring daily commutes of two hours each way are not unusual. When the high-speed railway is up and running, this will drastically expand the number of desirable areas for working people and it will give people more choice about the places in which they live and work. There will be an increased demand for accommodation in the towns and cities along the route and young professionals make ideal tenants. Having easy access to more job markets could also serve to discourage people from getting on the property ladder, instead preferring to stick with the flexibility that renting brings. It is not uncommon to spend a few years in a place whilst deciding whether or not to put down more permanent roots, and when that happens there will be other tenants waiting to take their place.
Train travel should improve on the whole, even on lines that aren’t directly affected, since the new high speed tracks will relieve the pressure on some of the busiest routes. Despite projections of the railway removing 9 million journeys off the roads each year, it is still expected that the trains will be less crowded and more comfortable for passengers. This may prompt people to begin commuting when they have previously lived and worked locally, thus increasing the pool of potential renters.
Although they will make up the bulk of users, commuters are not the only reason the HS2 is good news for investors. The communities directly affected by the development are also experiencing a boost. It is estimated that there will be a total of 500,000 extra jobs created, including the construction workforce of 10,000 that are currently working across 250 locations to complete the first stage. Of this, there are approximately 2000 apprentices that are learning a valuable trade and the works have so far been delivered with involvement from 2000 businesses – 99% of which are UK based. There will be a further 20,000 employed in the build and 3000 staff members to keep it running smoothly once it opens. The extra wealth created by the increased employment will benefit the local economy further; more good news for investors in the area.
It is estimated that every £1 that goes in to the HS2 project will see a return of £2.30. There are already vast regeneration schemes planned or underway in HS2 cities, with local councils intent on making the most of the opportunities that HS2 will bring. Projections state that 90,000 new homes will be built, with Leeds alone planning on doubling the size of their city centre through a mixture of residential, commercial and leisure. Not only are cities working on improving the more tired areas, they are also investing in the protection and enhancement of their cultural gems – such as the famous Liverpool docks which are facing exciting protective redevelopment. Many of these projects are anchored to the HS2 growth and have been attracting impressive levels of foreign investment. So whilst the HS2 may attract new residents, the ongoing improvements will ensure that those residents stay and make their homes there.
As demand is building, now is the ideal time for potential new investors to take the leap and be ready to cash in when the time comes. If you are an established property investor who already has a presence then you are well placed to reap the benefits so now is the time to sit back and let your investments do the work for you. Either way, property investors are set to cash in on the HS2 developments.