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Liverpool Market Update: November 2017

November 14, 2017Article by Kirsty Rose

Liverpool’s pre-eminence in the UK buy-to-let sector has been clear for some time now, even if it has taken a few years for public perceptions to catch up.

The northern city on the banks of the Mersey is now internationally renowned as a lucrative and stable investment destination, and the accolades keep coming. A May 2017 study by mortgage broker Private Finance placed Liverpool top in its table of buy-to-let hotspots, with 8% net yields – miles ahead of the rest of the field, with second place Nottingham substantially lower at 5.6%.

How did Liverpool get to be in a league of its own?

Liverpool’s economy has become larger and more dynamic, with a lively job market fuelled by a huge supply of well-educated graduates from its universities, while Northern Powerhouse and other devolution funding has sparked an epic regeneration cycle, smartening up the centre and boosting business and tourism alike.

So far so good, but Liverpool is not alone among Northern cities experiencing what feels like a sequel to the industrial revolution. Manchester, Liverpool’s partner in crime when it comes to coaxing investor attention beyond the M25, is arguably more popular internationally but is lately at risk of topping out due to an exponential increase in supply. Rents are high and rising across the North, but what sets Liverpool apart is low prices.

Liverpool’s average rent in 2017 in the Private Finance study was £1,021, just £2 higher than that achieved in Portsmouth – number five in the list. But what makes the difference between Portsmouth’s 4.2% yield and Liverpool’s 8% is Liverpool’s average house price of £122,283 – a whopping £74,858, or 61%, less than that of Portsmouth.

Furthermore, Liverpool is the most affordable city in the UK according to Hometrack’s index, and is second only to Belfast in terms of remaining below its pre-crisis peak (9.4%). That means not only that undervalued property prices are amplifying rental yields in Liverpool, but also that the city holds the greatest growth potential of the English secondary cities.

JLL projects that prices will grow by 22.8% to 2021, and with values already rising by 6% in the year to July, including a jump of 1.9% in June alone (ONS), the low prices on which Liverpool’s exceptional yields depend, may not last long.

The Fundamentals

In addition to a strong, dependable market for capital appreciation that remains below its peak and continues to perform well despite 2016/17’s market-wobbling moments, Liverpool is perfectly suited to the rental market.

21.75% of homes in Liverpool are privately rented, a high proportion in comparison with the national average of 16.7% (Census). Add to this a student population in excess of 50,000 and the highest growth in job vacancies in the country (19.9% in March 2017) and it is not surprising that demand for city centre living is rising relentlessly (Telegraph). As a result, rental price growth in 2016 was an incredible 10.6% according to JLL, who forecasts that it will continue to increase by a further 17.6% by 2021.

It is principally the booming job market, with 26,000 new private sector roles added between 2010 and 2016 (FT), that is attracting newcomers to Liverpool, but it is the high-profile and community-focused regeneration of the city that is keeping them there.

A monumental series of redevelopment projects is just beginning to transform Liverpool. This ranges from schemes designed to power economic growth, such as port and road infrastructure provision and commercial district growth plans, to those for enhancing urban lifestyles and drawing more and more residents to the bustling centre, including a massive waterfront transformation and new creative and pedestrianised zones throughout the city.

Liverpool is truly becoming a future-oriented city. The promise of the rental market, already immense, will only improve with time. However, it is anticipated that prices will rise in tandem, and investors are advised to seek out opportunities before its transformation is priced into the market.

£5bn of regeneration over the past decade, with £10bn still in the pipeline

  • Liverpool Waters docklands regeneration (£5.5bn to 2025)
  • New Knowledge Quarter (£1bn)
  • Pall Mall mixed-use redevelopment (£200m)
  • Ten Streets creative district (2,500 new jobs)
  • Anfield neighbourhood project (£260m)
  • Liverpool2 shipping port (£400m)
  • Road improvements (£250m)

Interested in investing in Liverpool? We have a limited selection of apartments in Parker Street Residences available for clients.

  • Studios from £77,500 (cash only)
  • Yields of 8% NET assured for 5 years
  • L1 postcode in Liverpool’s city centre
  • Completion due January 2018
  • Full residential title and on-site amenities

Enquire today!

 

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