LIVERPOOL PROPERTY GUIDE 2016/2017
LIVERPOOL PROPERTY GUIDE - 2016/17
EMBRACING BUY-TO-LET When it comes to placing the importance of the buy-to-let property sector in context, a few key statistics speak volumes. The number of rented households in Britain is now over 5.7 million – a figure which is expected to reach 7.2 million by 2025. This means that within 20 years, one in four homes in the UK will be rented. The latest figures also value the Private Rented Sector (PRS) at £1.29 trillion, which means that it has now surpassed the value of mortgaged owneroccupied stock for the first time. The buy-to-let property sector is big business in its own right. As house prices continue to rise, and as more people become reliant on the PRS, owning property for the purpose of renting it out will continue to prove a highly popular and lucrative option in both the short and long-term. From an investor’s perspective, ‘bricks and mortar’ has consistently performed well over the past decade. But apart from providing high returns at marginal risk, property is also versatile and can work to suit different budgets, requirements and future plans. Buy-
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to-let is a popular asset because it is a two-tiered investment strategy: investors generate rental income, which will naturally grow over the years, while benefitting from capital appreciation when the time comes to sell. Over the past decade, the market has experienced rising demand from both well-established residential investors wanting to boost their portfolio and new entrants into the market looking to subsidise their income or looking for an alternative to a traditional pension. So, why should a buy-to-let investor consider Liverpool? In short, Liverpool
is arguably the most affordable major British city, offering investors great value for money and higher yields than other large regional cities. While Britain’s decision to leave the EU has undoubtedly created uncertainty across the entire economy, the prompt and decisive action taken by the Bank of England to cut the base rate has since stabilised and strengthened the housing market, alleviating any fears of a house price crash. In the run up to the EU referendum, JLL data shows that activity in the British housing market was “modestly weaker” as uncertainty
266,000
18%
£1.29 trillion
The projected shortfall of newbuild properties by 2020
Predicted house price growth in the North West by 2020
The current value of the UK’s Private Rented Sector (PRS)
(Shelter)
(JLL)
(Savills)
Predicted extra demand in the Private Rented Sector (2016-2020)
Source: Savills 5 year forecast, FT.com
crept in, but the same analysis shows that house prices continued to grow at more than eight per cent year-on-year nationally, which proves the market’s buoyancy, stability and profitability against volatile and uncertain external conditions. JLL’s report, which was published following the EU referendum, concludes that most investors see the sector as either unaffected or a potential beneficiary of the Brexit vote, especially as institutional investors are driving “sharp yields” for residential
5.7 million Number of rented households in Britain (Pricewaterhouse Coopers)
Number of people joining the PRS annually
UK RENTAL DEMAND:
1,200,000 5 year prediction for PRS growth
1,000,000 800,000 600,000 400,000 200,000 0
2016
2017
Liverpool ONE Shopping Centre
2018
2019
2020
property – around 4.75 per cent gross in London and 5.5 per cent on average in regional cities. Therefore it is no surprise that, despite these uncertain economic times, buyto-let is upholding its reputation as one of the most reliable and profitable investments currently on the market. With growing tenant demand, increased rental values and falling interest rates, it is forecast to continue thriving in the post-Brexit environment. But in order to guarantee the best possible return on investment, location is absolutely imperative for property investors. It is of paramount importance that investors target regions with a reputation for high yields, ongoing demand for rental properties and the promise of future house price inflation—all of which Liverpool has in abundance. Getting the most out of buy-to-let also hinges on a strong knowledge of tenant requirements in the area in which you’re buying, as well as keeping abreast of industry forecasts. But for those investing in the right property in the right location, the potential to generate impressive returns is unparalleled.
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LIVERPOOL PROPERTY GUIDE - 2016/17
WHY LIVERPOOL? Sitting at the edge of the Irish Sea, Liverpool has undergone the most remarkable renaissance of any British city in recent years. This has manifested itself most obviously in the transformation of the city centre, a regeneration that has resulted in Liverpool consistently featuring as one of the best locations in Britain for buy-to-let investors. With much of its waterfront a UNESCO World Heritage Site, Liverpool is the principal city within the Liverpool City Region, which also incorporates the local authority districts of Halton, Knowsley, Sefton, St Helens and Wirral. The relative affordability of properties – particularly those in the city centre and its outskirts – combined with excellent yields and
Liverpool’s ‘Three Graces’ part of the UNESCO World Heritage Site.
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capital appreciation makes Liverpool an ideal opportunity for investors deterred by London’s lower yields, and detachment between earning potential and property costs. A multi-billion pound investment in economic regeneration is actively transforming the city of Liverpool, and shows no signs of abating. In the last
decade alone, the city has attracted more than £5 billion of investment in property, infrastructure and services. These regeneration projects have seen Liverpool become home to some of Britain’s most ambitious residential, commercial and leisure developments, spearheaded by the wildly successful Liverpool ONE project, a 1.5m sq ft shopping and leisure destination
5.16%
11%
500,000
Average rental yield in Liverpool
Average growth in rents in Liverpool in 2015
(The Times)
(The Times)
Projected population of Liverpool by 2025
which has refocused the whole city centre towards the waterfront. One of the busiest shopping areas outside London – and the largest open-air shopping centre in the UK – this £1 billion development has broken retail records quarter by quarter ever since its opening, recording an average annual footfall of over 27.5m visitors each year. Liverpool is also committed to the renaissance of its best natural resource, the River Mersey. The city’s fortunes were initially focused around the river and, in recent years, it has once again been earmarked as the heart of Liverpool’s ongoing prosperity. Not only has the River Mersey been reshaped to make room for the world’s largest supertankers, but a £400 million deep-water container terminal called Liverpool2 is opening up the Port of Liverpool to create even more trade for a city whose famous waterways were once its lifeblood.
(ONS)
Having prospered immensely from being named the 2008 European Capital of Culture, the city hasn’t looked back since. The investment
“impressive cultural heritage: it has more listed buildings than any other city outside London, its galleries and museums are among the best in the country, and its ongoing programme of urban regeneration is transforming the city centre”.
In the last decade alone, the city has attracted more than £5 billion of investment in property, infrastructure and services
Indeed, the city is looking to the future with immense confidence. Over the next decade, Liverpool will deliver some of Britain’s largest and most ambitious development and infrastructure schemes with a combined development value in excess of £7 billion. In addition to Liverpool2, these also include the Liverpool Waters development, which will see the transformation of a 60-hectare docklands site into a world-class mixed use waterfront quarter, as well as the construction of the new Royal Liverpool University Hospital and Health Campus, new Liverpool Chinatown and the continued regeneration of North Liverpool.
of £130m into the regeneration of Albert Dock - the most visited free tourist attraction outside of London was just the beginning of Liverpool’s resurgence. Described by Lonely Planet as “one of the most pleasant cities in northern England”, the city of Liverpool has in recent years been known and celebrated for its
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LIVERPOOL PROPERTY GUIDE - 2016/17
A HUB FOR BUSINESS AND CULTURE Liverpool’s economy is thriving, which makes it a compelling location for buy-to-let investors. With acknowledged strengths in sectors including automotive, business services, creative and digital, life sciences, low carbon technologies and ports and logistics, demand for rental properties aimed at professionals is incredibly strong. The city is at the centre of a population of 1.5 million people who drive a £20 billion city region economy. According to data collected by Liverpool Vision, 76 per cent of businesses operating from Liverpool have rated it an excellent city in which to conduct business. This is among the many reasons why a range of multinationals – including Bank of New York, Jaguar Land Rover, Maersk, Novartis and Sony – have established UK operations across the Liverpool City Region. Furthermore, there’s no shortage of highly skilled new recruits – more than 16,500 students graduate from Liverpool’s four universities each year.
A further driver for Liverpool’s economic growth lies in its connectivity. Liverpool John Lennon Airport is located 15 minutes from the city centre and is now regarded as one of the UK’s top ten airports, transporting more than 5 million passengers annually to over 60 destinations worldwide. In addition, hourly train services run to London in just two hours and Birmingham in less than an hour and a half. Meanwhile, the Government’s plans for
the ground-breaking HS2 rail service – a high-speed rail network launched as part of the Northern Powerhouse initiative – will create more efficient links across the North West of England. Additionally, more than 50 years after The Beatles took the world by storm, Liverpool’s cultural offering remains just as enticing. The city is home to a raft of award-winning museums and galleries,
Walker Art Gallery
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UNESCO World Heritage Site
£50 billion
30.7%
Value of investment in Liverpool over the next 50 years
Percentage of Liverpool population under 25
Liverpool City Region Property Investment Guide, 2016
The Times, 2016
as well as live music venues and a diverse food and drink scene which is constantly evolving and innovating. The city also stages a range of festivals and cultural events on a regular basis which draw crowds in their thousands. However, for many, Liverpool will always be regarded as a ‘city of football’, with the football stadiums of both Liverpool Football Club and Everton Football Club drawing massive international audiences. Liverpool’s Anfield stadium sees an average attendance in excess of 44,000, while Everton’s neighbouring stadium
£
consistently draws more than 38,000 visitors for each home game. As a result of the many positive advances and huge investment Liverpool is currently experiencing, there has been an astounding increase in the amount of residential property coming to market. The city’s skyline has evolved beyond recognition in recent years and, with development schemes such as Liverpool Waters in the pipeline, there will be even greater opportunities for both first-time and established buy-to-let investors in the future across the city.
North West England
Liverpool
£29.5 billion The Liverpool City Region Economy ONS, 2016
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LIVERPOOL PROPERTY GUIDE - 2016/17
THE BENEFIT TO INVESTORS The high cost of buying property, coupled with changing generational attitudes towards homeownership, has seen a substantial rise in demand for rental accommodation across Britain. As a result, an increasing number of investors are turning to the buy-to-let market as they acknowledge the substantial earning potential on offer. When it comes to location, London has traditionally been regarded as the most profitable and desirable place in which to invest. However, in recent times, soaring house prices in and around the capital are not being mirrored by rental increases, leading to reduced investor returns. Regional cities, on the other hand, present a more fruitful option for wouldbe landlords. House prices continue to rise – with prices in some affluent Liverpool postcodes reported to have increased six-fold in the past 20 years, according to Land Registry figures. However, such astronomical price increases are not citywide, and property in Liverpool remains significantly more affordable than in the London area. As such, investors can make their capital go much further and enjoy higher yields in proven buy-to-let hotspots like Liverpool.
Liverpool skyline
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Liverpool has become a firm investor favourite, known for being home to some of the most affordable properties of any major British city. According to property analyst Hometrack, the average price for a property was £112,200 in June 2016, which was 6.1 per cent higher than 12 months previously. In the first quarter of 2016, it was reported that UK house prices rose at their sharpest rate in Liverpool, which analysts believe was due to buy-to-let investors rushing to complete purchases before the extra 3 per cent stamp duty deadline.
According to research carried out by LendInvest, an online platform for lending and investing, the average rental yield for properties in Liverpool between 2010 and 2016 was 5.5 per cent, resulting in an average annual rent of £6,708. By comparison, the average rental yield for prime central London locations hovers around four per cent and parts of Liverpool – including the city centre, Edge Hill, Fairfield and Kensington – have recorded yields as high as 8.8 per cent. Only the Blysworth Hill area of Glasgow has recorded yields higher than this.
CHOOSING THE RIGHT PROPERTY For first-time investors and experienced landlords alike, one of the most important decisions is whether you want your tenants to be students or professionals. Both bring benefits that need careful consideration. When it comes to investing in student accommodation, Liverpool has close to 50,000 undergraduates and postgraduates at any one time, so there is no shortage of potential tenants. But you do need to choose a property close to a university campus to ensure the largest pool of potential tenants and ensure the largest possible rental returns.
Liverpool University
Many investors are increasingly examining the potential short and long-term benefits of buying off-plan
Those investors targeting professionals – and particularly young professionals – have a burgeoning number of city centre apartments to choose from, as residential property developers have been building with this demographic in mind in recent years. Luxurious, high-spec apartments that offer amenities such as on-site gyms and concierge services which appeal to this audience are the ones that have the highest tenant demand, while simultaneously bringing the healthiest yield. Many investors are increasingly examining the potential short and long-term benefits of buying off-
plan. These properties tend to be significantly better value than established products on the market and, by the time they’re completed, they can be worth tens of thousands of pounds more than their original purchase price. In addition, off-plan properties are less likely to suffer maintenance issues because of their new-build status, and are frequently more attractive to potential tenants because they have modern décor and brand new fixtures and fittings. Finally, when considering where to invest, it is always advisable to identify those areas within any city that are earmarked for regeneration.
Liverpool is no exception. For obvious reasons, any property in the vicinity of one of the major regeneration schemes planned for the city could pay dividends. It is also worth monitoring the opening of new shops, restaurants and bars – particularly those up-market establishments that indicate the imminent gentrification of an area. To find out more about investing in Liverpool, call Knight Knox on 0161 772 1370 or email info@knightknox.com.
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LIVERPOOL PROPERTY GUIDE - 2016/17
ABOUT US Knight Knox is a leading provider of buy-to-let developments to the private investor market. Specialists in sourcing investment opportunities in both new-build residences and high-end refurbishment projects, Knight Knox boasts an impressive portfolio of both completed and future stock – a true testament to the quality of the properties it brings to market. The team works in partnership with four highly experienced developers – X1, Fortis Developments, Forshaw Land & Property Group and Crossbow Investments. Nurturing relationships with these developers has allowed Knight Knox to build a track record of over 75 successful buy-to-
Knight Knox head office, Salford Quays
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let developments across the UK, including prime new-build residential buy-to-let apartments and high-yielding boutique student accommodation projects in major cities throughout the UK. Its diverse range of properties has enabled Knight Knox to offer a wide range of opportunities to suit all investment needs.
As featured in:
“I will continue to be guided by the experience of
Knight Knox and will keep investing in areas that are making me money.”
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Mr M. Skinner, UK investor
Total number of UK projects launched
53 Number of completed and tenanted developments
£835+ MILLION
Total value of all UK projects launched
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Knight Knox Quay West at MediaCityUK Manchester M17 1HH United Kingdom +44 (0)161 772 1370 www.knightknox.com This report has been created by Knight Knox using information that is correct at the time of print (January 2017). The report should be used as a guideline only, and should not be used in lieu of financial advice from an IFA or similar qualified financial professional. Knight Knox will not be liable for any financial loss, cost or expense incurred or arising by reason of any person using or relying on information in this publication. 0117-V1