Is Liverpool Oversaturated With Student Accommodation

Liverpool Skyline

Liverpool has been a growing city as recent modernisation projects and new developments have turned an all-ready thriving city into one that has moved into the 21st century.

As one of the most prominent cities in the UK and in a prime location in the north, it has always been on the radar of investors. As the city has grown in population and seen a lack of housing supply, it has been an investors haven, particularly in the residential sector but what about the student accommodation sector?

Is there a demand?

When it comes to top universities, Liverpool is up there as one of the best and that has increased the demand from students to study there. With this demand has come an increase in the construction of purpose-built student accommodation and that also has to compete with the traditional student accommodation.

Analysing the figures might paint a certain picture but perhaps investors should still keep an open mind when it comes to investing in student accommodation in Liverpool. As it currently stands, there are 6,000 student bed spaces being constructed and this will be added to the already increasing number of student properties in the city, and that has left investors feeling slightly hesitant about investing in this sector in the city. This is understandable, especially when reports from the likes of Savills says that the supply of property is surpassing the demand from students. Worrying it might seem, and this might leave investors thinking that the days of high yields and low competition have gone.

Around the city centre, it is clear to see that the student accommodation sector is still thriving. Large developments are punching their way into the skyline with some developments having the ability to house over 1,000 students. There are many smaller developments taking place and over the last three years alone more than 5,800 bed spaces have been created.

Is Liverpool Oversaturated With Student Accommodation Aspen Woolf

Investment Opportunities Remain

Liverpool is already home to Purpose Built Student Accommodation but a large portion of that comes in the form of student accommodation located in the suburbs. Many years ago, students were seeking this kind of accommodation and that saw more and more properties being turned into houses in multiple occupation (HMOs) in an attempt to soak up the demand. While students used to have a need to live in the suburbs, they have now changed and this has meant that they have a real appetite to live in the centre of the city. Here they can be close to campus as well as the lively atmosphere and wide range of bars and restaurants. As a result, many of the student accommodation properties located on the suburbs are now being altered to accommodate young professionals who are living and working in the area but require more space and peace in the suburbs. This has meant that older student properties are being taken out of the sector, potentially leaving a gap for more centrally located student accommodation to be built.

Another positive is that in recent years, the number of students has increased considerably. Between 2015 and 2016 alone, the number of students increased from 50,000 to 60,000 and that number has grown and will continue to grow. So much so that the universities in Liverpool only provide beds for around 16% of their students and so, that means that the 84% shortfall has to be made up somewhere. This is where opportunities become apparent for investors.

Is Liverpool Oversaturated With Student Accommodation Aspen Woolf

Investors should begin looking at the bigger picture and the way in which student numbers are going to grow. This is a figure that will not only grow as a result of domestic students but also overseas students. More and more foreign students are choosing to come to Liverpool for the high standard of education and with that comes an increase in demand for first-class accommodation. Students from Europe, China and Japan have a different set of needs when it comes to student accommodation and they are often more willing to pay higher prices for better accommodation with more features. Therefore, they often opt for student accommodation that has a lot more space and features such as security, gym’s, communal areas and luxury features that most would associate with accommodation in the residential sector. Along with this, international students require good access to transport links as well as the vast array of bars, restaurant and shops that can be found in the centre of Liverpool. So, in years gone by where they would have opted for an HMO located in the suburbs, they now have a new desire for excellent quality and a great location. This has meant that the outdated student accommodation is being cast aside.

When it comes to investing, investors need to pick their investments wisely and perhaps not focus too much on the figures. The needs of students are changing and with that should come a new approach from investors. Therefore, they should be focusing on accommodation that is within close proximity of excellent amenities, a high standard of quality and finished as well as other services that students can make use of.

Essentially, even though there are many developments springing up throughout Liverpool that are aimed solely at students, there are opportunities. Old landlords who were once the choice of students throughout the city are having to re-purpose their properties because students are no longer valuing lower priced rents. They are now looking for simple access to lectures and a short walk home after a night out and that is why the repurposing of old properties will help to readdress the increase in supply. Once the out-of-city HMOs have been removed from the sector, it will enable investors to make the most of the increase in demand once again. So, not everything is as it might seem and even if the figures are not looking favourable, things are likely to change and with that comes plenty of opportunities to invest.

 

Why Liverpool Is A Key Area For First Time Buyers

Ariel View of Liverpool City in the UK

The north has come into its own in recent years thanks to the Northern Powerhouse initiative, extensive investment in key city infrastructure and developments transforming the landscape. All of this, along with the Brexit effect on the south east causing prices to plummet in former property hotspots, mean that northern cities are where it’s at both for investors and first-time buyers.

With all this in mind, it’s perhaps not surprising that recent research from Zoopla has found Liverpool to be one of the most affordable cities in the UK for first-time buyers.

First-time Buyers Index

Liverpool ranked third behind Middlesbrough and Hull as the most affordable when compared with 50 other major cities. Buyers in Liverpool can expect to an average price of £122,137 for a property. Middlesbrough came in second with an average price of £107,041 and Hull first at £104,376.

To compile the index, Zoopla analysed several different data points and compared the 50 largest cities in the UK. The data points include the deposit amount required, Stamp Duty tax relief available and property prices. By combining these and converting to a score out of ten, the index was created.

Liverpool Data

The average first-time buyer in Liverpool needs a deposit of £18,320. This is based on 15% of the property’s value at £122,137. As a comparison, Manchester first-time buyers need an average deposit of £25,314 on property costing £168,761.

However, Manchester is still very much affordable when compared with the south of the country. London is unsurprisingly at the bottom of the index and shows that a first0time buyer would need to get a deposit together of £77,727 and expect to pay about£518,178 for a property.

Unaffordable Areas

As well as London, areas like Cambridge are out of reach to most first-time buyers. An average deposit in Cambridge equates to £65,716 for a property cost of £438,109. Brighton, Colchester and Reading are the other cities in the bottom five of the index.

Northern Cities More Viable

Recent research shows that northern cities have the most viable options for first0time buyers in this country. Liverpool is particularly popular with first-time buyers as it offers a modern city with plenty of redevelopment, investment and restructuring, as well as a buoyant job market and affordable property.

It’s difficult for people in the south to get on the property ladder at all, and we expect to see northern cities continue to rise in the rankings.

How Liverpool Is Attracting Investors From Around The World

reliance house exterior

At the start of 2018, Liverpool is one of the country’s most popular cities thanks to its cultural, historical and architectural legacy. It’s also attracting investors from around the globe thanks to the dynamism of its property and business sectors.

We don’t think that the increase in investment in Liverpool property is likely to stop any time soon. Here are five reasons why we think it will continue through 2018 and beyond.

  1. Continuous And Extensive Regeneration

How Liverpool Is Attracting Investors From Around The World Aspen Woolf

Visitors to Liverpool will see the horizon scattered with cranes as the city continues to pump money into new developments. These range from commercial and residential buildings to new tourist attractions. One of the most interesting projects currently on the go is the Ten Streets regeneration. This is part of a 20-year strategic overhaul of the city, focusing on constructing a new ‘creative district’ aimed at bringing long term economic benefits to Liverpool.

  1. Endless Tourism Potential

The tourist sector in Liverpool is worth more than £3.8 billion. It’s one of the most visited cities in the UK and welcomes around 54 million people every year. The knock-on effect of this is that the industry supports about 50,000 jobs in Liverpool.

Popular attractions for tourists are varied, ranging from the Cavern Club for Beatles fans to the UNESCO World Heritage waterfront area. All these must-see attractions are backed up by more than a dozen Michelin-starred restaurants, and many more nightclubs, bars and eating places to try out.

  1. Undersupply Of Housing

Between April 2009 and March 2016, homes were built in Liverpool at an average rate of 713 every year. The Home Builders Federation estimates that Liverpool actually needs 3,000 homes every single year to keep up with the demand. This major mismatch between supply and demand has created an attractive investment opportunity.

The demand for homes in the city is constantly rising. The population of Liverpool rose by more than 120,000 people between 2001 and 2011 according to the Census, which represents a growth of 5.5% in just ten years. This pushed up housing prices and rents in the city, and in the outer lying regions.

In 2016, rents increased by 4.4% across the North West and house prices have risen by 22.7% since 2012. The price of apartments and flats has risen even faster at more than 25%.

  1. Young Population

How Liverpool Is Attracting Investors From Around The World Aspen Woolf

Liverpool consistently attracts a wide range of young professionals, drawn to the city for its economic potential. In the ten years between 2001 and 2011, those aged 22-29 living in the city centre increased fourfold. This has created an enthusiastic, dynamic, forward thinking workforce, ideally positioned to provide the city with a bright economic future.

Businesses are working hard to properly harness this young population, with business incubators set up in the city by the likes of Launch 22 and Santander. Liverpool is firmly ahead of many other UK cities when it comes to future-proofing its economic success.

  1. Economic Strength

Liverpool isn’t just a promising location for UK businesses and investors – it’s also one of the most appealing cities in the UK for multinational companies. Its mix of business sectors and income streams has allowed the city to build up strong economic credentials.

fDi Magazine, owned by the Financial Times, named Liverpool as joint second in the top ten mid-sized European cities of the future 2016/2017, particularly noting its business friendliness and connectivity.

Why Liverpool Is Top For Student Housing Investment                 

Student accommodation is one area of the property market that won't be hit by political uncertainty

One area of the UK’s property sector continues to boom, regardless of the uncertain economic outlook for the country.

Research by Savills shows that by the end of 2017, £5.3 billion will have gone into student accommodation investment. Brexit doesn’t appear to have slowed down investment in this sector, and there has also been a 2.2% rise in applications from overseas students since 2016.

Student accommodation continues to attract much interest from investors, as demand is exceeding supply in most regions. Excellent yields can be made by discerning investors, and the north west of England is proving one of the most exciting areas for opportunities in the UK.

Northern Appetite For Student Accommodation

Why Liverpool Is Top For Student Housing Investment                  Aspen Woolf

The north west of the country as a whole is seeing demand increase for student housing, with Mistoria Group demonstrating that the region was up by 38% year-on-year. And Liverpool is one of the most important areas for investment.

There is a real shortage of student accommodation in a city that boasts many higher education offerings. This has led to a situation where there are excellent yields for investors in shared student accommodation. Areas that are particularly ripe for investment in Liverpool include Wavertree, Toxteth, Kensington and Kensington Fields.

Houses Of Multiple Occupation

It’s possible for savvy investors to buy a high-quality, three-bedroom House of Multiple Occupation (HMO) from around £120,000. Each room can be rented out for an average of £85/week, including bills. Extras like en-suite bathrooms can push the rent up to around £110/week. The ROI (return on investment) is attractive, at around 13%. This splits into 8% cash rental and 5% capital growth.

Experts advise investment in HMOs rather than ‘student pods’ (individual rooms or small pods). These are at a disadvantage when it comes to resale value and potential for capital growth, and are far riskier than traditional larger, shared properties. The investor pool for single pods is much smaller than for HMOs, flats and other types of student accommodation.

Other Areas For Investment

Why Liverpool Is Top For Student Housing Investment                  Aspen Woolf

Image credit: Tim Green via Flickr

The Northern Powerhouse is undoubtedly a strongly attractive region for investment in student accommodation. There are many purpose built student accommodation properties (PBSA) in development, as well as the potential of traditional housing stock, giving lots of choice and opportunity.

Research from Simple Landlord Insurance found that the very top university for investors is also up north – in Scotland. Prince William’s Alma Mater, the University of St Andrews offers yields of up to 12%.

At the other end of the scale, the lowest yields come from Oxford University, averaging at just 3.3%. For example, a property in the main student district costing an average amount of £720,000 only brings in about £2,000 in rent.

Confidence High in Liverpool Property Market

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Transactions may have dipped in traditionally popular areas of the UK, but Liverpool stands firm as a great property investment city.

It joins other cities including Manchester and Sheffield as encouraging alternatives to London for investment. Its relatively low property prices and potential for high yields is proving to be of interest to selective investors looking to increase their portfolio in an area that looks set to get stronger in the near future.

Why Do Investors Like Liverpool?

Confidence High in Liverpool Property Market Aspen Woolf

With the political uncertainty caused by Brexit and the snap election in June this year, along with the hike in stamp duty last year, there is an air of caution in the property investment sector.

Prices in central London have increased considerably over the last few years, resulting in simple inaccessibility for many investors and buyers alike. With no bargains on offer in all the usual places, and a more cautious attitude, attention has turned to other areas.

Liverpool is one of the most attractive alternatives, with potential rental yields of 7%+. More than double that currently achievable in London.

Post Financial Crisis Catch-Up

Since the 2008 financial crisis, Liverpool has struggled to get back on its feet in terms of property prices. Other large cities like Leeds and Manchester saw a faster growth in prices, while Liverpool lagged behind. While prices dropped 6% between 2005 and 2015, the recovery has been strong over the last two years, and looks set to be equally strong in the future.

According to property website Rightmove, the overall average price of a property last year was £152,406. While they were similar to prices in 2015, they were up 9% on 2014’s average price of £140,367.

Most of the sales in 2016 were terraced properties, which have an average price of £104,314. Flats reached around £117,674 on average, and semi-detached houses sold at an average of £172,326. These prices are significantly below the national average property value in England of £243,220.

These figures also show that the slowest annual growth in house prices from July 2016 to July 2017 was in London (at 2.8%). It’s now the eighth month in a row that London’s house price growth has remained beneath the UK average.

Regeneration Projects Underway

Following the trend that once turned some of London’s poorest areas into up-and-coming property hotspots, Liverpool is undergoing long term, extensive regeneration.

This will only improve its appeal as a city to move to for renters and buyers. Increasing the attraction of the city to young people looking for urban living will attract those who can’t afford London, but are seeking a similar vibe.

With numerous multi-million pound developments in the city centre and in the docklands area of the city, Liverpool looks likely to become even more in demand. The area around the docks is likely to become the most sought-after part of the city, with carefully designed, high quality, relatively low cost living available.

Large Student Population

Confidence High in Liverpool Property Market Aspen Woolf

There are more than 60,000 students living in Liverpool, a number that is set to increase due to the draw of its higher education facilities. There is a high level of interest in both converting properties for use by students and for purpose built student accommodation.

The number of students presents opportunities for perceptive investors looking for long-term yields from a predictable and reliable demographic.

Impressive Yields

Liverpool is home to many renters, with more than 22% of the entire housing stock in the city owned by private landlords. While rental yields obviously vary depending on the specific area and property type and size, they are competitive across the region.

As times change and the tide turns away from London, Liverpool could be looking at a property boom during the next couple of years. The economic impact of the UK leaving the EU in March 2019 is yet to be seen, but there are clearly many reasons to consider building up a property portfolio in Liverpool as a safe investment.

Why Liverpool is Attracting Buy-to-Let Investors

Ariel View of Liverpool City in the UK

Investors interested in buy-to-let property are increasingly heading north to the cities of Liverpool, York and Manchester.

Back in 2014, then Chancellor George Osborne announced plans for a ‘Northern powerhouse’. His plan was to combine the qualities and might of major cities in the north of England and their population of more than 15 million people to revitalise the economy.

While Osborne is no longer in the government, and much has changed politically, the idea of this northern powerhouse is taking on momentum.

Connectivity is Vital

In order to bring cities closer together, connectivity is essential. This works through the implementation of new transport plans, including HS1 2 and 3 (Northern Powerhouse Rail) and the longest road tunnel in the world cutting through the Pennines, to drastically cut journey times between key cities like Manchester and Sheffield.

Other plans to minimise the economic gap between the north and south of the country involve building up the technological, scientific and cultural sectors. Manchester is investing around £1 billion into its infrastructure, for example.

Why Liverpool is Attracting Buy-to-Let Investors Aspen Woolf

Buy-to-Let Investment

Many high-level buy-to-let investors are from the south of the country, attracted to the north by lower entry prices and relatively high yields. The fact that capital growth remains fairly modest isn’t enough to put people off.

In June 2017, Liverpool was crowned best city with the highest yields for buy-to-let investment, according to mortgage broker Private Finance. Sheffield also rates highly for city centre yields.

While in much of the north capital gain is modest, there is still the possibility for larger gains in specific areas. York is a good bet for buy-to-let from the perspective of capital growth. City centre apartments will always remain popular with professional singles and couples, and there’s also a wide scope for superior flat shares.

The University Effect

For many of the cities and towns popular with buy-to-let investors, the student affect is a key contributor. Student populations in cities like Liverpool and Manchester provide a reliable and continuous market for property investors.

Many new developments in Liverpool are for the private rented sector (PRS), and so can’t be sold as owner-occupier properties. These kinds of development really play up the benefits of superior rental accommodation, with lots of city centre developments offering prime locations, concierge service and gyms on site.

Why is Liverpool Such a ‘Good Buy’?

For the same reason as Manchester. Liverpool is a great place for buy-to-let investment due to its strong local economy and serious shortage of housing.

Liverpool also boasts a brand new superport, which is creating new job opportunities in shipping and logistics. The universities are feeding into the employment boom and the incessant demand for housing is pushing rents up. All great news for investors looking for a healthy return on investment (ROI).

Young professionals who want to live right in the centre of buzzing cities is a significant demographic in 2017. There’s huge demand for eye-catching apartments, centrally located near to the best nightlife, retail opportunities and restaurants.

When the economy crashed ten years ago many northern cities were left high and dry with too many new-build flats left empty. In 2017 there is a diverse mix of owner-occupiers, investors in developments, more build-to-let properties and major companies boosting jobs. All in all, the foundation is strong for investment in the northern cities, and Liverpool in particular should be on the list for any discerning property investor.