If you want to cause an argument in a room full of buy to let investors, just ask the question "flats or houses?" Then ask for opinions on London or the regions.
Houses in rural or coastal locations have been good to property investors over the last eighteen months, particularly where there are strong transport links. While the trend towards larger properties in greener locations is far from over, the pendulum may now be swinging back to city centre flats.
Commuter homes or city centre flats?
Historically, houses in towns and villages with good transport links have favoured investors with a view to long term capital growth. This is particularly true of the south-east which has outperformed all other regions for decades. Their weakness has always been the lower yields offered by more highly priced properties.
The big shift in the 2000s has been the drive by the regions to regenerate their city centres, attracting both government and private investment to increase city centre jobs and improved retail, entertainment and cultural offerings.
The populations of the biggest regional cities are seeing exponential growth, driving up demand for both owner occupied and tenanted properties. Each new city centre development reduces the available land and pushes property values and rental prices ever upwards.
Follow the infrastructure
Major infrastructure projects attract inward investment to those areas that directly benefit. A classic example is Crossrail. Even before it is fully opened it has dramatically changed property markets in places like Stratford and Woolwich and further afield in Reading and Slough. Most of the uplift in property values is already priced in, but HS2 will have a similar effect.
The big regional centres
Beyond London, the three biggest cities for inward investment are Birmingham Manchester and Leeds. All are attracting major employers, economic growth is high and city centre populations are growing.
Undoubtably the biggest beneficiary of HS2, the city is attracting some of the major names in finance, technology and business services. It is at an earlier stage of its regeneration than Manchester and offers some of the best opportunities to property investors.
The poster boy for urban regeneration. Manchester has transformed it's city centre. Prime central properties remain attractive, but investors might do well to consider those areas close to the city centre with very rapid transport links.
The HS2 u-turn is certainly a blow to the city. However, it is the commercial and cultural centre of Yorkshire's huge economy and suffers a chronic shortage of city centre accommodation. Property prices represent very good value to investors.
London's outer boroughs are seeing considerable investment from some of the UK's largest housebuilders and they don't often call the market wrong. Beyond the M25, it is, as it always has been, about London commuter links. The Crossrail effect is not yet fully played out and pockets of value can still be found.