City Residential Q1 2015

City Res: Freehold recovery fuels supply

Alan BevanA recovering freehold market is encouraging developers to enter the Liverpool apartment market again, says City Residential MD Alan Bevan in his Q1 report.

Market summary

Sales

  • Prices up 1.09% on quarter and 5.77% on year.
  • Continued strength in sales across most price ranges
  • Strong institutional investment interest at trip to MIPIM.

Lettings

  • Prices up 1.85% on quarter and 3.79% on year.
  • Continued reluctance of tenants looking to move – concerned about lack of supply
  • Political issues maybe impacting on tenants decisions over the next 2-3 months
  • Landlord licensing scheme came into force on 1 April 2015

Completions

  • Huge increase in completions in comparison to last quarter 66% and year on year 82%
  • Expected to increase dramatically over the next 12 months

Student Market

  • Continued stream of new developments being proposed/starting on site
  • Announcement of student task group to look at suitability/viability of student schemes
  • City Centre continuing to prosper as ideal place for students to live and study

Residential sales

The strength we have seen in the residential market has continued through into the first few months of the year with the city seeing an overall quarterly price rise of 1.09%, bringing the annual increase to 5.77% The official figures from Halifax (0.9%) and Nationwide (0.0%) would seem to suggest growth slowing slightly in the Liverpool/Northwest market. With city centre growth exceeding that of the overall region it would reiterate our belief that Liverpool City Centre should outperform the region going forward.

We highlighted in our last quarterly report the substantial increase in the number of buyers at the upper end of the market and this has continued through in the first quarter of the year.

That is not to say that the lower/middle end of the market is not performing well either as investors, first time buyers and empty nesters continue to invest in apartments in the city centre. Although we saw a dip in completions in the final quarter of 2014 we predicted an increase this year and the first quarter highlighted this increase in activity with completions up by around 66% quarter on quarter and over 82% year on year.

With the increase in prices and activity we are also beginning to see a substantial and welcome increase in supply of apartments. For anybody that understands the city centre market it has been obvious for some time that there are a substantial number of potential sellers who have been unable to sell/market their property due to depressed prices/lack of demand. With the surge in the market over the last 12 months they have been able to begin the process of marketing/selling which has provided the level of supply to match the increased demand. We expect this to continue as prices increase but not to cause too much of a supply problem.

City Residential were one of the Liverpool MIPIM partners who travelled to Cannes in March to help showcase and promote the city to UK and overseas investment. The response form the investment community was excellent with numerous investors looking to develop/buy in the city over the coming years. Many appear attracted by the lower prices (in comparison to other northern cities) and growth potential especially given its popularity soaring and numerous future groundbreaking developments (Liverpool Waters, Liverpool 2 etc).

In addition to attending MIPIM we also hosted a residential conference at the end of the quarter with JLL where both companies highlighted their belief that the city offers good value and the prospect of further price growth over the coming years. During the conference we also highlighted the substantial increase in population we believe the city will experience over the next five to 10 years. It is this population growth that we believe will spur a substantial increase in residential development over the next five years.

Download full report on the City Residential website here

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