Chadwick Street aerial CGI, Nextdom, p planning

Nextdom's recently approved 435-apartment scheme is a welcome boost to the city's pipeline. Credit: via planning documents

City Residential hopes for end to Liverpool housing market’s ‘perfect storm’

The property agency said it would be “extremely surprising” if current market volatility did not subside to some extent in the next three to six months. 

City Residential’s latest quarterly briefing on the Liverpool housing market listed rising mortgage rates, inflation, the Building Safety Act, ongoing issues around cladding, and the lingering impact of Liz Truss’s mini-budget as the main issues contributing to the “perfect storm” stymying Liverpool’s residential sales market. 

“On a standalone basis each issue would not create a huge challenge but together [they] create a major headache,” the report, written by City Residential managing director Alan Bevan, states. 

Sales struggling

One reason for the slowdown in residential sales cited in the report is banks’ “pedantic” approach to lending amid economic uncertainty.  

“Whilst we would naturally expect them to take a cautious stance given the economic backdrop, they have severely tightened what they will lend on, trying to negate some of their perceived risky lending,” the report states. 

In practice, this means some banks are refusing to lend against properties above commercial premises.  

“As the majority of apartment blocks in Liverpool have commercial premises on the ground floor you can start to see the potentially damaging effects of this,” the report explains. 

The recently adopted Building Safety Act is also having “unintended consequences for the market” and many of its proposals are “unclear and ill-communicated”, according to the report. 

Rental strength

Despite challenges in the sales market, Liverpool’s rental scene is performing well. The report describes rental demand as “the saving grace for many landlords”. 

Rising mortgage rates are forcing more people to turn to or remain in rental properties, with many landlords looking to increase rents by 5% to 10% at the end of tenants’ terms, the report states. 

The strength of the rental market might encourage landlords to keep hold of assets, according to City Residential. However, they too are fighting against rising outgoings as the Bank of England continues to increase interest rates. 

While the residential market is forced to navigate ongoing turbulence, City Residential believes there is “light at the end of the tunnel”. 

The agency predicts mortgage rates will fall this time next year and that some of the knock-on impacts Building Safety Act will soon be ironed out. 

However, in recent months optimism over a potential calming of the market has been misplaced. 

The report concludes: “Our biggest concern is that we have been here before and have been hopeful of an improvement in the past only to see continued and unexpected delays, thereby prolonging an already difficult market.” 

Increasing supply

Liverpool’s supply of city centre homes has been boosted in recent weeks. Last week, Nextdom’s 435-apartment scheme off Pall Mall was given the green light by the city council’s planners, while reworked proposals for a 25-storey tower on the former Ovatus site have also emerged.

Progress is also being made at Festival Gardens. At the end of June, Liverpool City Council started its search for a project team to draw up a fresh vision for the site, which could deliver 1,500 homes. The costly remediation of the plot is drawing to an end.

There are several large schemes that still need to be unlocked, including the New Chinatown site off Great George Street and Infinity, a 1,000-apartment development acquired out of administration by a group of investors last year.

Liverpool’s residential market will be discussed at Place North West’s Place RESI event on 19 October 2023.

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