Property commentators talk a lot about 'the likely impacts of HS2' and it's certainly an issue that investors should bear in mind. The prospect of a new high speed rail network could have important implications for demand for property in several large British cities.
However, as it is presently proposed, HS2 shouldn't be regarded as entirely fixed and inevitable. Already, its budget has rocketed by over 70% - from a 2010 estimate of £32.7bn to what some regard as an optimistic £56bn today. Indeed, a number of officials - including some within the Treasury - expect that the real figure will eventually lie between £80bn and £100bn. At a time when the public purse is under enormous pressure, such ambitious schemes inevitably attract criticism and calls for public money to be spent on higher priorities.
It's also worth bearing in mind that HS2 is a long term venture. Currently, though plans for the Manchester connection have been delayed by a year, government ministers are standing by their assertion that the project will be completed by 2033. That's a period of at least 15 years, which will undoubtedly see shifts of power within Parliament and competing demands for funding. How plans and timings for HS2 will be affected in those intervening years is impossible to predict, so investors probably shouldn't rely too heavily upon them.
HS2 Route and Schedule:
Nevertheless, some things are certain. One is that HS2 has been given the formal go-ahead. Plans were approved by government in the summer of 2017. These plans are based on a phased approach.
Phase 1 will see a 250mph line built between London Euston and central Birmingham, and this line will be served by a number of branches and new stations. Work is scheduled for completion in 2026.
Phase 2 will be split into two parts. Phase 2a will connect the West Midlands to Crewe, and services are expected to begin in 2027.
Phase 2b - scheduled for completion in 2033 - has the most important implications for northern cities. From Crewe, the line will split, assuming a Y shape, with one spur connecting to Manchester, and the other trending northeast towards Sheffield and Leeds.
The year's delay to the Manchester spur has been allowed in order that HS2 can be designed to connect effectively with another important infrastructure project - Northern Powerhouse rail, which will ultimately connect Liverpool to Hull.
HS2 and Property Investment - The Effect:
It's only sensible to bear in mind the potential for changes, slippages and other complications between now and 2033 (or beyond). A new administration could delay or substantially alter the scheme, and 15 years is plenty of time for new economic challenges to arise. However, the original HS2 plan was first mooted under the last Labour government and in view of how much the present government has committed to it, it would be a brave minister who would decide to end HS2 altogether. Many commentators believe that too much has already been invested and that consequently, in some shape or another, HS2 must happen.
If it does, then the implications for property investors are significant.
The West Midlands:
Birmingham, for example, lies only 100 miles from London and a train ride of less than 40 minutes would put the capital well within acceptable commuting range. In that respect, England's 'second city' should then benefit from the same halo effect that buoyed up prices so dramatically in outer London. It's also worth noting that the challenges of routing a new high speed rail line through densely developed urban areas will mean that many of the new HS2 stations lie on the outskirts of the big cities. Consequently, it won't just be Birmingham's city centre that benefits; neighbourhoods that are now relatively quiet and affordable
will find themselves on a fast, direct line to London. That's bound to make them attractive to workers who need to work in the capital but can't afford its exorbitant living and property costs. Increases in local property prices would be almost certain to follow. In this respect, HS2 would accelerate an already well established trend. In December 2017, Knight Frank reported on Birmingham's property market, noting: "Buyers are coming from further afield... we are seeing significant numbers of buyers from the South East looking to purchase in he city." In the same report, the company emphasised the many improvements taking place here and Birmingham's success in attracting major employers such as HMRC, HSBC, RICS and Network Rail. As a result of these and other factors, Knight Frank concluded "The city continues to evolve and improve and we predict more new occupiers clamouring to take the new space created in the core." In the same month, figures produced by ONS / Barratt Homes pointed to massive outward migration from London, and found that more of these people settled in Birmingham than in any other UK local authority. In the 12 months to the middle of 2016, nearly 6,500 people moved to the city from the capital.
Manchester is most commonly cited in discussions about how the North will benefit, but HS2 should have a positive effect on many other areas, too. Crewe will be the first of these, and Leeds will follow, but the local rail networks will also beconnected via a mixture of high-speed and traditional lines. As a result, population centres such as Liverpool, Preston, Sheffield, York and Carlisle should all see much faster routes to London, Birmingham and other stations on the network. Investors should also consider the importance of the connection with the proposed Northern Powerhouse line - an east-west route that seeks to provide better communications within and across the North. HS2 will link this to the Midlands and London, reducing journey times still further and - potentially - delivering an important stimulus to northern economies generally.
Today, 2033 seems like a long way off. It will be some years yet before tenants in Birmingham make their first high speed commutes to London, and years more before HS2 is accessible to passengers in Manchester. For investors, however, the benefits may well come much sooner than that. The mere expectation of HS2 should be enough to stir interest in the property markets along its route, and as its launch dates approach, demand for investment properties should rise. Already, HS2 is cited as an important factor in many investment brochures, and rightly so. Property is a long term business, and the prospect of rising demand must be a consideration when evaluating the merits of a new acquisition. 2033 might feel too distant for some of those investors looking at properties in the North, but Phase 1 will deliver results much sooner. 2026 is only eight years away, and much of that time will be devoted to track laying and the development of new stations - visible infrastructure projects that investors and home owners will find impossible to ignore. As that process gains pace, the West Midlands property market can be expected to respond. Birmingham will be one of the first areas to benefit from Phase 1, with Curzon Street Railway Station serving the city centre and a second station - Birmingham Interchange - located in Solihull. The city is already a growth market for landlords, with both demand and rental values rising well ahead of the national norm, but by 2026, the impacts of HS2 will be feeling very tangible indeed.