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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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Liverpool Property – Update on Liverpool landlord licensing scheme

Liverpool city council says it is “looking very closely” at the wording of a government letter about its pioneering plan to force all landlords to sign up to a licensing scheme.

The council is the only one in the country to introduce a blanket licensing scheme – believed to apply to around 5,000 landlords who own 50,000 private sector rental properties. Under the scheme the council determines that any landlord to be granted a licence (for which the landlord pays up to £500 per property) must be a ‘fit and proper’ person.

As with the licensing schemes introduced in many other local authorities, Liverpool’s landlords have to meet a variety of conditions around fire, electric and gas safety; rectify disrepair issues; tackle pest infestations; keep the exterior in a good state of repair and deal with complaints about anti-social behaviour caused by tenants.

The scheme was introduced following a consultation which produced 2,000 responses; the council claims the significant majority of respondents were in favour.

However, the council has now received a letter from Brandon Lewis, minister for housing and planning, saying the blanket approach is flawed, and forces perfectly good landlords to pass the costs of the licences on to tenants. Any such scheme introduced from April 1 must receive ministerial approval first – but of course Liverpool’s is already underway.

The Liverpool Echo newspaper says the council suggests that so far 1,341 landlords who between them manage 5,870 properties have registered their details.