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New build property investment returns: Liverpool V’s Manchester V’s Birkenhead.

We have all heard a lot over the past months about the death of new build buy to let investment in the UK. Undoubtedly the second homes SDLT surcharge has caused investors to carefully consider the maths for new purchases. Likewise, the upcoming changes to the taxation of mortgage interest relief will cause many landlords with existing portfolios to reconsider their position. So with these changes already known, why is BTL still considered not just a viable, but a desirable investment?

My area of interest is the North West of England, particularly the areas around Manchester, Leeds and Merseyside. We presented a couple of investment seminars at this year’s Homeowner and Property Investor Show in Docklands Arena. They were standing room only, so we know there is plenty of interest from out of (our) area investors wanting to buy here. We also run tours for investors around the local area to highlight the vast range of projects currently underway (see Liverpool and Wirral Waters, the new Liverpool 2 port, China Town, Salford Quays, et al in my previous posts). We have around 2 groups a week here from London for our own Grand Tour – think Clarkson, Hammond and May but with fewer car crashes and more coffee.

The most regularly asked question is about the comparative returns available on new build between Manchester, Liverpool and Wirral, and what are the prospects for the 3 areas.

My own view is that they all have their own merits, depending on your aims. There is no space on this short post to go into too much detail, but in brief:

    Manchester

Manchester offers the widest range of existing high quality provision. The market for better quality apartments is more mature than the other areas, and the job prospects for the city are very good. Unfortunately this is reflected in the prices, with current new build 1 bed flats achieving around £2,100 per M2. Prices start around £110,000 per unit for mid-range developments on the periphery of the city centre. Rents are high compared to the wider region, but so are prices. Despite this gross yields are around 5.5%, with net yields of 4.2% in better quality new-build sites.

    Liverpool

Liverpool has seen very rapid development, in the past 5 years particularly, driven by the rapidly improving local economy and some major infrastructure investments. Prices are still far below Manchester levels but rising quickly, as are rental rates – 1 bed flats close to the river regularly go for £685 pcm. If you are looking for an absolute bargain you are probably 18 months too late, although there are still some very good buys available if you know where to look. Prices range from £1,500 – £2,000 per M2, with the prices rising the closer you get to the River Mersey, particularly in the L1, L4 and L69 postcodes. Gross yields are averaging at 7%, or 5.6% net.

    Wirral

Wirral is still the wild west for new build investors. Until recently there was not much good quality stock to buy into, although things are now changing. A number of schemes are completing and there are other interesting developments in the pipeline around the Birkenhead and West Kirby areas in particular. The area benefits from being only 10 minutes by train from Liverpool centre. We see more people moving from Liverpool to Wirral to take advantage of the lower prices whilst still retaining access to the big city experience. Good quality stock goes for around £1,400 per M2. Gross yields are holding at 8.5%, Net around the 7.2% level.

conway-st-to-tunnel

So, who comes out top? For range of options Manchester is difficult to beat. If your target investment is only city centres then Liverpool is a very good bet, especially the area south of the Albert Dock and into the Baltic Triangle.

However, our winner is Birkenhead. Our view is that east Wirral in particular offers the best opportunity for price increases in the next 1 – 5 years, coming off its current low (some would say undervalued) base.

With low but rising prices and high yields, coupled with the 10 minute transit time to Liverpool city centre for both work and leisure, Birkenhead is our top tip for property investors in the region.

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Bigger container port for Liverpool – more jobs for Wirral

Plans are well advanced for a bigger container port for Liverpool, bringing the biggest container ships in the world to our doorstep.  Called post-Panamex ship, they can carry 25% more cargo than previous types.  The new facility will be built adjacent to the existing container port at Seaforth.  I have attached a video link below that gives more detail:

 

So what does it mean for us in Wirral and Liverpool?  In a word – jobs.  Peel Ports are the owners of the site and they say it will take 2 years to construct.  Once opened it will become the centre of container distribution for the UK.  This means we can expect some high quality, high paying jobs to be here during construction.  When the port is operational we will benefit from the increased train and road traffic, as well as the jobs that come with operating the port itself.

I am here to read about property stuff, why does this mater to me?

It matters because it is part of the theme of regeneration that is centred around Wirral Waters and Liverpool Waters, and because any major uplift to the local economy will affect house and commercial property prices in our area.  This is another game changer for our local economy.  Put alongside the waterfront developments on both sides of the Mersey it will have a major beneficial impact on everyone who has invested in property in our region.

I have said it before in previous blogs, but Merseyside is about to go through a period of immense change.  Canny investors see this and are already positioning themselves to take advantage of the changes ahead.

 

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Wirral Property – House Price News

 Latest data on house price changes in Wirral make interesting reading.  The headline figure is that prices are up an average £8,653 or 4.21% across the area.  This is slightly below the national average of a 5.2% increase.

This shows an average sale price of £199,017 for Wirral, with 2,035 sales taking place in our area within the past 12 months.  Property prices are now higher than before the property crash of 2008 – 2011.

Within Wirral the usual areas remain popular, with Heswall and West Kirby doing well according to our friends at Zoopla.  Less expected is the resurgence of values within the Noctorum area.  Vyner Road South has done particularly well in the past year, but so has the whole area between Noctorum Lane to West Rd.  Clatterbridge has out performed the local market and looks set to continue the trend, with some good quality properties coming to market.

The most surprising data related to parts of New Brighton.  The area around Warren Drive has seen substantial activity and has done very well.  There are a number of large, well appointed houses and there seems to be an increased interest in the market.  It is about time that all the fantastic improvements in New Brighton are reflected in the local house prices.  I am sure this trend will continue.

My tips for the coming months?  Upton and New Brighton for owner occupiers.

For investors, however, things are very different.  Demand remains high for single bed flats, and for 2 and 3 bed houses.  Rents are stable in Wirral despite reports of a slowing trend in other part of UK.

The Council’s selective licencing scheme is about to come into effect.  The expectation is that it will drive down prices in the affected areas for a few years, as more properties are “forced” on to the market.  We should then expect prices to rise again, fairly sharply I suspect, as the benefits of the scheme become manifest.  Avoid buying in those areas for now.

Central Birkenhead, Tranmere and Rock Ferry continue to offer some of the best yields for investors.  That’s where my money is going.

 
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Liverpool Property Investment

Details of the latest Liverpool housing developments are below, which may be of interest to our landlord and developer friends.

£10.5m conversion of an empty office building in Liverpool into 136 “micro apartments” looks set to get the go ahead from councillors on the city’s planning committee next week.

Rich Link Investments’ plan for 2 Moorfields for the change of use of the first to fourth floors to residential apartments has been brought back to planners following a disagreement with the city council in October over the payment £388,340 for nearby public art and the provision of off-site space ahead of the start of development work.

Planning officers have recommended approval of the project on grounds that the proposed conversion “will regenerate a vacant building and contribute to the local economy by providing new residential accommodation and increasing football across the area”.

When the development was originally presented to the planning committee in October, councillors voiced their concern about the smallness of the apartments – 25sq metres – with one member reported by the Liverpool Echo describing them as “like rabbit hutches”.

Councillors at the meeting on Thursday June 9 are also being advised to nod through plans for a nine-storey development of 101 apartments including ground floor commercial use at Riverside on Sefton Street and Stanhope Street.

The application from X1 Developments is for 0.2 hectares of land which forms part of a larger development site covering land bounded by Parliament Street, Stanhope Street, Caryl Street and Sefton Street.

The site has been partially developed by Vermont Developments after it was given permission for a mixed development comprising five blocks – one 22-storey and four others seven to 10-storeys high containing 374 units, a 145-bed hotel, a 1,200sq m leisure centre/spa and a 1,400sq m restaurant bar and 600sq m of retail space.

However, Vermont went into administration early in the build, leaving phase one (Block 3) complete and occupied, phase two (Bock 2) under way, but the remainder of the site in an unfinished state for a number of years.

Late in 2013, construction works re-started and Block 2 is now complete and Block 4 is under way. XI Developments’ application replaces the previous 22-storey (Block 1) proposal.

Councillors will also be asked to give the green light to plans for an eight-storey office building with flexible ground floor space at Princes Dock.

The application for the development on what is currently a 0.18 hectare car park has been made by Peel Holdings and will include retail financial and professional, as well as food and drink and office use.

Elsewhere in the city, a plan has been brought forward to demolish the four-storey Cressington House employment office in St Mary’s Road.

Applicant Trillum (Prime) Property GP was to build 32 houses on the rectangular plot in the Cressington Park Conservation Area.

The outline permission request seeks only to establish the principle of residential development and means of access from St Mary’s Road, but specifies it is for 32 two-storey houses.

A scheme for 74 apartments on the site of a large former canal side warehouse last used as a BMW Garage and workshop at Vauxhall Road in Liverpool has also been recommended for approval.

Two four-storey blocks will house 35 flats (14 two bed, 21 one bed), 23 flats (12 two bed and 11 one bed and a three-storey block 16 flats (nine two bed and seven one bed). The applicant is MV Canal Ltd.

Also under consideration is a plan to convert Liverpool City Mission in the Kensington Fields Conservation Area on the corner of Jubilee Drive, Edinburgh Road and Leopold Road into a development of 42 apartments for working at the Royal Liverpool Hospital and at the city’s universities.

Internal works would create six floors within the property with each apartment operating as a duplex.

Officers are once again recommending approval with a report to the committee stating the “application would bring the whole building back to use and secure investment to the exterior of the building”.

Exciting times for the city, as developers once again pile money into large scale new build and conversions.  As those readers of last weeks Sunday Times will know, Liverpool was rated as one of the cities generating the highest yields on BTL investments.  Add in what it happening to the city as a whole (and the macro economic data) and I am expecting house prices to start climbing more rapidly throughout the city region.

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UK Investors buy with sitting tenants

The proportion of properties bought by landlords with a sitting tenant has reached the highest level since 2005, according to Countrywide, one of the UK’s biggest estate agents.

The agency group, which has analysed over 65,000 rental properties, says that in 2014 some 11 per cent of all rental properties bought by a landlord came with a sitting tenant. This represents a four-fold increase on 2008.

Countrywide says the stats shows that tenants in properties sold as occupied have lived in their home significantly longer than the average tenant. A quarter of these tenants signed contracts of two years or longer compared to just five per cent of tenants overall.

This means for a growing number of renters, the decision of their landlord to sell does not affect their living conditions.

Countrywide says there are signs that landlords are increasingly looking to buy from other landlords where there is already a tenant in place. Across every region of the UK, the proportion of sales with a sitting tenant rose.

In London, for example, over quarter of all purchases by landlords in 2014 came with a sitting tenant, up from 12 per cent in 2008.

The agency says it is in London and south east England where yields are lowest and where the proportion of landlord purchases with a sitting tenant is highest. Here, landlords are most likely to buy a property with a sitting tenant to ensure they receive a rental income immediately, improving their return.

Between 2008 and 2014, the north east of England saw the largest uplift in landlords buying with a tenant already in place.