City Res: Year of development ahead

The recovery in the Liverpool city centre apartment market is turning into another boom, according to the latest quarterly report from City Residential MD Alan Bevan.

Here is an edited extract of the City Residential Q4 2014 research, available in full to download at the City Residential website here .

Market Summary

Sales

  • Prices up 1.71% on quarter and 5.33% on year
  • Continued strength in sales across most price ranges
  • Upper end of market performing exceptionally well (One Park West, Mann Island…)
  • Continued increase in development proposals/activity

Lettings

  • Prices up 1.35% on quarter and 4.23% on year
  • Increasingly lower supply levels driving up rents
  • Surge in interest in better developments
  • PRS gathering momentum with first schemes on site

Population analysis

  • Increase in overall population due to new student schemes
  • Overall city centre population now more than 40,000

Sales and completions analysis

  • Reduction on busy 3rd quarter
  • Expected to increase dramatically over the next 12 months

Student market

  • Continued stream of new developments being proposed/starting on site
  • Concerns over the rate of increase in supply whilst student numbers growing slowly
  • City Centre continuing to prosper as ideal place for students to live and study

Finance and mortgage

  • Low & decreasing inflation lengthens timescale for expectation of first interest rate rise
  • Rates on mortgages continue to drop sharply

Auction results

  • Decent activity across most price ranges/property types

Development

  • Heaps Mill receives planning permission
  • Chancery House receives planning due to launch in spring 2015
  • Wellington Buildings (The Strand) bought for residential conversion

Private rented sector

  • Second PRS scheme – Baltic/PARLA – now funded and onsite
  • Announcement of Moda Living's new 40 storey tower at Princes Dock/Liverpool waters
  • Moorfields conversion of former HMRC building progressing well

Residential sales

The strength we have seen in the residential market continued through into the final few months of the year with the city seeing an overall quarterly price rise of 1.31%, bringing the annual increase to 5.33% The official figures from Halifax (0.7%) and Nationwide (-0.3%) whilst telling a story of a slowing market across the North West do not reflect the continued increase in demand we are seeing in the city centre.

Whilst there has been a good overall demand from all types of buyer across all price ranges/property types one of the more interesting themes that we have seen over the course of the last 3-6 months is the resurgence of sales at the mid/upper end of the market. Whilst it was the bottom end of the market (repossessions, investment deals) that led the market out of recession during 2010-2013 it appears this interest has now progressed into the higher quality stock. Some good examples of this increase in interest include the likes of One Park West, Mann Island and The Colonnades. All three schemes have seen a dramatic increase in sales with prices moving strongly ahead during the quarter. The Colonnades stand out as a great comparable between the interest now and 12/18 months ago. At that time there were approximately 20/25 properties listed with the figure now having dropped below 10 with seven sales since the summer. Another good example of this top end buyer is the substantial interest we have seen in our recently launched Philharmonic Rise development. With prices ranging from £499,950 to £599,950 we have already sold five houses with no show house yet available for potential buyers to view.

The most encouraging aspect of this increase in activity at the upper end is that it is predominately owner-occupiers that are buying rather than investors. This continues to reinforce our view that Liverpool is maturing as a city and is now attracting different types of purchasers who are seeing the city as a real alternative place to live as opposed to the suburbs. If this momentum continues to build it will allow developers to begin to construct the types of apartments/schemes that all of us want to see: high quality, well designed buildings with good specifications and strong management.

With the increase in transactions, breadth of buyer type and lack of new supply we are now starting to see prices in many places nearly back to where they were in 2007. Whilst this may worry some commentators the city is a much better place to live than then and at least this time around we have at least 10 different types of buyer rather than the one we had then; speculators looking to make money.

Residential lettings

After the usual manic 3rd quarter the city always settles down with very low levels of available stock and a lower tenant demand. This final quarter feels much the same as previous years albeit stock levels are even lower than this time last year and are at an all-time low for the city. Tenants are acutely aware of the lack of stock with an increasing amount more than happy to stay in current accommodation rather than taking the risk of giving notice and ending up with nowhere to live. This has resulted in the average tenancy length increasing from around 11/12 months some two to three years ago to around 15/16 months now.

Rents have continued to rise across all property types/price ranges but just like in sales it is the upper end of the market that has surprised us all on the upside. Quality apartments in all schemes have proved very popular but again it is the best schemes (One Park West, Mann Island etc) where rents have climbed quickly. Many of these new tenants are from outside the city and are being attracted by all of the amenities we have spoken about in previous reports.

Some are trying out the city by renting but many have made the decision that Liverpool city centre is a better place to live than the decent suburbs.

On a less positive note in our opinion is the news during the quarter that Liverpool City Council is to introduce, like many other local authorities, a citywide landlord licensing scheme.

The proposals will cover approximately 50,000 private rented homes across the city. The scheme which was approved in October 2014 will come into force in April 2015 and will cost £500 per property for a five-year license. Whilst we wholly support some element of licensing to weed out those landlords that do not look after the tenants, we believe this broad brush approach is not the right answer and will penalise those landlords and indeed agents who already offer a professional and caring approach to the rental market.

On a final note below is a chart showing the ever increasing population levels in the city. We would have been laughed at 15 years ago if we had predicted that there would be more than 40,000 people living in the city centre/docklands yet that threshold has now been reached and surpassed. With an increase in renting interest from all tenant types (student, professional, corporate, manual worker etc) we genuinely believe there is no ceiling in the population the city may well see in the next 15 years.

Your Comments

I think the over-supply in student cluster flats will be the story of 2015!

By Henners

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