Knight Knox - Sheffield Property Guide 2106/17

SHEFFIELD PROPERTY GUIDE 2016/2017:

SHEFFIELD PROPERTY GUIDE - 2016/17

BUY-TO-LET AN INVESTMENT OPPORTUNITY The buy-to-let property sector is flourishing - and its growth shows no signs of slowing down. This is due to a simple fact: a constantly increasing number of people are becoming reliant on the Private Rented Sector (PRS) as record house prices deter or prevent potential first-time buyers from getting on the property ladder.

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owever, this phenomenon is providing a boost for the housing market by encouraging developers to build properties tailored to meet the needs of both tenants and the buy-to-let investors who become their landlords. From an investor’s perspective, property has consistently provided high returns at marginal risk over the past decade. In addition to benefitting from a rental income (which can reasonably be expected to increase over time) buy-to-let investors also benefit from the capital appreciation of their investment properties, which has continued in recent years despite one of the worst recessions on record.

Since the turn of the millennium, the buy-to-let sector has also grown as a result of new entrants into the market looking to generate a new income, as well as established residential investors wanting to boost their portfolio. The number of rented households in Britain is now more than 5.7 million – and this figure is expected to reach 7.2 million by 2025. Within 20 years, it’s expected that one in four homes in Britain will be rented. The latest figures also value the Private Rented Sector at £1.29 trillion, meaning that it has now surpassed the value of mortgaged owner-occupied stock for the first time.

5.7 million + The current number of households rented within Britain Savills Residential Property Focus February 2016

£1.29 trillion The current value of the Private Rented Sector Totally Money Buy-to-Let Yield Map

The rise of generation rent Source: PwC analysis, English Housing Survey 45

Projections

Mortgaged

Proportion of households (%)

40 35 30 Owned Outright

25

Social Rental

20 15

7.2 million

Private Rental

10

2

2025

2021

2023

2017

2019

2015

2011

2013

2007

2009

2005

2001

2003

1997

1999

1993

1995

1991

1987

1989

1985

1981

0

1983

5

The projected number of households that will be rented by 2025 Savills Residential Property Focus February 2016

There have been many changes in the UK of late - not least of which was Brexit - but even this has not dampened investor demand. Prior to the EU referendum, many economists predicted that there would be an immediate and significant impact on both Britain’s economy and consumer confidence following a ‘leave’ vote.

This wasn’t to be - Britain’s services industry rebounded strongly in the summer of 2016, prompting many to conclude that in the immediate months following Brexit, it is indeed business as usual across the UK. In addition, the prompt and decisive action taken by the Governor of the Bank of England to cut the base rate to an unprecedented low is widely perceived to have both stabilised and strengthened the housing market.

Despite predictions that the British housing market may be significantly weakened by the EU referendum, JLL analysis to the contrary clearly shows

that, in the summer of 2016, house prices had grown at more than eight per cent year-on-year nationally and 14 per cent in London, while finding that institutional investors are driving ‘sharp yields’ for residential property – around 4.75 per cent gross in London and 5.5 per cent on average in regional cities. JLL’s report, which was published

In the summer of 2016, house prices had grown at more than 8% year-on-year

following the EU referendum, concludes that early indications suggest that most investors see the sector as either unaffected or a potential beneficiary of Brexit . Far from being put off, for many investors the UK’s exit from the European Union has meant nothing more than the ability to obtain a more affordable investment property as exchange rates became more favourable for international clients in the aftermath of the ‘leave’ vote.

For this reason, buy-to-let continues to maintain its reputation as one of the most reliable and profitable investment classes in spite of uncertain economic times. But location is of fundamental importance when it comes to ensuring the best yield. Equally important is the ongoing demand for rental properties and the promise of future house price inflation. Sheffield resolutely meets all these criteria, which is why the city is climbing up the table as one of the UK’s premier destinations for buy-to-let.

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SHEFFIELD PROPERTY GUIDE - 2016/17

WHY SHEFFIELD? Located in the strategic heart of the country in South Yorkshire, Sheffield markets itself both nationally and internationally on its high calibre workforce, high-growth employment sectors, fast access to British and overseas markets, innovation-led universities and the high quality of life that residents enjoy. Another major selling point is that the Peak District - Britain’s first national park - is on its doorstep and, considering that 61 per cent of the city is made up of greenspace, Sheffield has more than earned its reputation as one of the greenest and most picturesque cities in Europe.

Sheffield

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hese attributes consistently make both the city centre and many of Sheffield’s suburbs attractive propositions for buy-to-let investors and tenants alike. What’s more, Sheffield has developed beyond all recognition in the last decade. The city centre has a distinctly vibrant feel to it, and the evolving skyline clearly demonstrates the ongoing confidence of both domestic and international investors.

This dynamic core city is part of the wider Sheffield City Region, which has a diverse economy encompassing large market towns and a significant

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rural community. This city region encompasses more than 1.8 million people and approximately 700,000 jobs. It is comprised of the nine local authority areas of Barnsley, Bassetlaw, Bolsover, Chesterfield, Derbyshire Dales, Doncaster, North East Derbyshire, Rotherham and Sheffield.

Sheffield is also a place of learning, which affords great opportunity to investors looking to target the student market. At any one time, there are more than 63,000 students studying at either the University of Sheffield or Sheffield Hallam University.

Together, they produce 21,000 graduates annually, helping to ensure that almost a third of the city’s labour pool is educated to degree level or higher. Furthermore, almost a third of the entire workforce based in Sheffield is under the age of 30. It is this young and vibrant labour pool that attracts businesses to base themselves in this exciting city. In light of these facts, it’s unsurprising that prime privately rented accommodation in both the city centre and trendy suburbs consistently rent well while providing excellent yields.

However, it’s not just Sheffield’s current popularity that makes the city such a prime investment destination—the city’s ambition for future prosperity makes its investment prospects even better.

The city made history in 2015 when Sheffield City Region negotiated a devolution deal with the Government which will give the city region devolved decision-making powers on infrastructure, transport, skills, housing and other drivers of business growth.

As part of this process, Sheffield intends to create 70,000 jobs across the city region in the next decade alone

through a formula that includes creating better places to live and proactively encouraging business growth.

In recent years, this ambition has manifested itself most clearly with developments that are transforming the city centre, with retail and recreation at the top of the agenda. In 2013, The Moor Markets opened, offering a selection of food and retail outlets in a modern building reminiscent of Sheffield’s famous Winter Garden. The next phase of development will see the introduction of a number of new retail and food outlets as early as 2017 to revitalise and rejuvenate a space bursting with potential.

Plans are also underway to create a new £480 million ‘Retail Quarter’ in the heart of the city, which Sheffield City Council hopes will create world-class shopping, leisure, residential and office opportunities. It aims to breathe new life into the city centre by connecting people and business and attracting new retailers, office workers, bars, restaurants and accommodation to a prime city centre location.

1.8 million + The population of the city regions, encompassing 700,000 jobs Sheffield City Region Overview

63,000 The number of students currently studying in Sheffield

SHEFFIELD POPULATION:

Welcome to Sheffield People and Skills

Predicted population growth (2016 - 2037)

700,000 633,200

650,000

Population

600,000 550,000

563,000

500,000

70,000

450,000 400,000

The number of jobs that will be created in Sheffield over the next decade

2016

2037

Welcome to Sheffield People and Skills

Sources: State of Sheffield Report 2016 & Sheffield Telegraph

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SHEFFIELD PROPERTY GUIDE - 2016/17

A BUSINESS & CULTURAL HOTSPOT Sheffield city centre is currently undergoing one of the most significant urban transformations in recent years, and this ongoing regeneration is likely to make the city an even more compelling location for buy-to-let investors.

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heffield’s economy remains in robust shape, and many attribute this to the diversity and entrepreneurial spirit that can prosper in such a dynamic environment.

Sheffield has evolved from its industrial heritage into a location focused on innovation and technology. Today, the city leads the way in developing advanced manufacturing processes across a range of industries, including aerospace, automotive and power, as well as oil and gas. The city is also home to one of the country’s largest healthcare technology clusters, known as ‘MedTech’. From legal services to major back-office functions for global companies, the city also has a diverse business and professional services sector. Gaming, software, films, IT and telecoms also form the basis of Sheffield’s growing creative and digital sectors.

A further driver for Sheffield’s economic growth lies in its connectivity. Sheffield is positioned at the heart of Britain’s motorway network, with the M1 within striking distance. The city also has excellent air connections, with five international airports - Doncaster Sheffield, Manchester, East Midlands, Leeds Bradford and Humberside - all within an hour’s drive.

HS2 could reduce the journey time from Sheffield to London by 34%

In addition, Sheffield’s train station - with its annual footfall of over 9.1 million passengers - provides direct access to most other major British cities, as well as two trains every hour which are reserved for the two-hour journey to London every day. The Government’s plans for the groundbreaking HS2 rail service - a high-speed rail network launched as part of the Northern Powerhouse initiative - could ensure that these links are even more efficient. It’s proposed that HS2 will run from London to Birmingham, then on to Manchester and Leeds calling at Sheffield, which would reduce the journey time from London to Sheffield by 34 per cent to around 79 minutes, while the journey times to Leeds and Manchester will be less than half an hour.

Sheffield’s connectivity is also enhanced enormously by the presence of its Supertram network. Aptly named, this light-rail network covers 18 miles and runs from Sheffield City Centre in a north western direction to Middlewood and Malin Bridge via the University of Sheffield and Hillsborough; north east to Meadowhall Interchange via Attercliffe; and south east to Halfway and Herdings Park via Norfolk Park, Manor and Gleadless. Such is the popularity of this tram network, an extension to Rotherham is currently under construction and is scheduled to open in 2017.

Sheffield’s cultural offering is also particularly strong. The city is home to a wide range of museums and galleries, as well as live music venues and a

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diverse food and drink scene, which is constantly evolving and improving.

host a number of shows and events throughout the year. In addition to being home to two football league clubs, Sheffield Wednesday and Sheffield United, and a professional ice hockey team, the Sheffield Steelers, Sheffield also has a notable music scene which has produced world famous bands such as Arctic Monkeys, Pulp and Def Leppard.

9.1 million passengers travel through Sheffield’s train station annually

As a result of the many positive advances and the immense investment Sheffield is undergoing, there has been a great increase in the amount of residential property coming to market.

In recent years the city’s skyline has evolved beyond recognition, making Sheffield an exciting prospect for both existing and first-time investors.

Two internationally renowned theatres are also based in the city centre, The Lyceum and The Crucible, which

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Travel time:

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Journey times to other major UK cities

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2 hours 2 minutes

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Travel time:

EF F

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ES TE R

40 minutes

H G IN RM BI

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Travel time:

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FI EL D

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52 minutes

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Travel time:

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1 Hour 2 minutes

1 Hour 50 minutes

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SHEFFIELD PROPERTY GUIDE - 2016/17

INVESTOR BENEFITS Historically, London has been perceived as the most desirable location in which to invest. But soaring house prices in the capital and its suburbs have not been mirrored in rental increases. Consequently, an increasing number of investors are examining other major British cities to discover whether they can achieve a better return on their investment.

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o, why should a buy-to-let investor consider Sheffield? In short, Sheffield city centre has potentially the highest rental yield of any British city. This owes much to the fact that it is one of Britain’s largest and most vibrant cities, with two huge universities as well as teaching hospitals. What’s more, Sheffield’s rental market has consistently shown itself to be robust, with demand currently outstripping supply. From city centre flats to terrace properties in fashionable suburban areas, there are numerous opportunities to find rentable properties that suit every pocket. But investors need to act fast - some of the most prestigious schemes are selling out offplan within weeks of being launched.

Sheffield is one of Britain’s pre-eminent ‘Northern Powerhouse’ cities. The Government has committed billions to the creation of world-class business infrastructure in the North of England and Sheffield is a key part of this.

In 2015, the Government agreed to

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give £30 million a year to Sheffield for the next 30 years for it to invest in manufacturing and innovation. Such sustained investment is likely to be reflected in the upward trajectory of the city’s property market.

The median house price in the S1 postcode is £69,995, bringing in a median rent of £675 per month Therefore it is no surprise that Sheffield regularly features as one of the top five British cities for buy-to-let yields, and investing in the city centre can bring the

highest yields currently available on the buy-to-let market. According to research

by TotallyMoney.com, the median house price in the S1 postcode is £69,995, bringing a median rent of £675 a month.

This represents a yield of 11.57 per cent.

The next best yield - 9.02 per cent - is found in Glasgow’s G21 postcode area.

According to research carried out

by LendInvest, an online platform for lending and investing, the average rental yield for properties in Sheffield between 2010 and 2016 was 5.2 per cent, resulting in an average annual rent of £6,292. By comparison, the average rental yield for prime central London locations hovers around 4 per cent.

Furthermore, average house prices in Sheffield rose faster than they did in central London in 2015, according to a report by Hometrack. Annual growth of about 6.3 per cent was recorded, compared with between 3 and 6 per cent in London over the same period.

INVESTING IN THE RIGHT PROPERTY It makes sense to seek out those areas within Sheffield that are earmarked for regeneration. For example, a property in the vicinity of any of the major regeneration schemes planned for the city could pay dividends in the medium to long-term. It might also be beneficial to keep an eye on new transport links.

For instance, Supertram services are increasing, so scrutinise development activity around potential new tram stations which could become increasingly popular with people looking to rent.

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part from deciding where to invest, there’s the major issue of deciding which type of property to invest in. Buying off-plan is an option that’s become increasingly popular in recent years. The main advantage of buying off-plan is that these properties are often better value than established products on the market. By the time they’re completed, they can be worth tens of thousands of pounds more than they were when originally sold – to the

The main advantage of buying off-plan is that these properties are frequently better value

benefit of savvy investors. Being newly built, off-plan properties are also less likely to suffer maintenance issues and tend to feature modern décor as well as unused fixtures and furnishings, making them more attractive to the end tenant

£5.1bn The amount invested in student accommodation in 2015 JLL Global Market Perspective Q3 2016

when the time comes to rent out the property.

A major decision that will affect the location as well as the type of property you purchase is your target tenant - are you looking to rent to professionals in the residential market, or to students in the Purpose-Built Student Accommodation (PBSA) market? Each has its benefits and when it comes to investing in any major regional city it’s worth considering carefully.

For example, Sheffield has in excess of 63,000 undergraduates and postgraduates at any time, so you’re unlikely to be short of student tenants. What’s more, if you choose a property close to a university campus, there will be an even larger pool of potential tenants to choose from.

However, if young professionals are your tenant of choice, Sheffield also has an outstanding mix of city centre apartments to target the city’s large working populace. High-end and high-spec apartments in the city centre, in fashionable areas like Shalesmoor have the broadest appeal for tenants, with additions such as on-site gyms and concierge services being known to optimise rental yields.

To find out more about investing in Sheffield, call Knight Knox on 0161 772 1370 or email info@knightknox.com.

4.9m The number of households in the UK Private Rented Sector Knight Frank Private Rented Sector Update January 2016

100 - 150,000 The shortfall of available housing every year PwC UK Housing Market Outlook July 2015

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SHEFFIELD PROPERTY GUIDE - 2016/17

KNIGHT KNOX Knight Knox is a leading provider of buy-to-let developments to the private investor market. Specialists in sourcing investment opportunities in both new-build residences and high-end refurbishment projects, Knight Knox boasts an impressive portfolio of both completed and future stock - a true testament to the quality of the properties it brings to market.

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he team works in partnership with four highly experienced developers – X1, Fortis Developments, Forshaw Land & Property Group and Crossbow Investments. Nurturing relationships with these developers has allowed Knight Knox to build a track record of over 70 successful buy-to-let

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Figures correct at time of print (October 2016)

developments across the UK, including prime new-build residential buy-to-let apartments and high-yielding boutique student accommodation projects in major cities throughout the UK. Its diverse range of properties has enabled Knight Knox to offer a wide range of opportunities to suit all investment needs.

“I will continue to be guided by the experience of Knight Knox and will keep investing in areas that are making me money.”

Mr M. Skinner, UK investor

73

53

ÂŁ780+

Total number of UK projects launched

Number of completed and tenanted developments

Total value of all UK projects launched

MILLION

As featured in:

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Knight Knox Quay West at MediaCityUK Manchester M17 1HH United Kingdom +44 (0)161 772 1370 www.knightknox.com This report has been created by Knight Knox using information that is correct at the time of print (November 2016). The report should be used as a guideline only, and should not be used in lieu of financial advice from an IFA or similar qualified financial professional. Knight Knox will not be liable for any financial loss, cost or expense incurred or arising by reason of any person using or relying on information in this publication.

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