Northern Property Guide 2016

NORTHERN PROPERTY GUIDE 2016: A guide to UK buy-to-let property investment in the North

Northern Property Guide 2016

FOREWORD

T

he buy-to-let market has grown significantly over recent years, with England reaching a record five million rented households in 2015.

Thanks to increasing demand for rental properties, rising fees and lowering interest rates, the market is set to remain buoyant as more and more investors purchase property for the sole purpose of renting it out.

If you’ve made a decision to invest in property and have set your budget, the next choice you’ll need to make is where to put your money. It’s key to invest in an area where tenant demand and average yields are high and the future growth of house prices is promising.

By doing this, you can ensure that your property remains tenanted and continues to generate income

Contents

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Why the North?

Assessing the benefits

Northern cities like Manchester and Liverpool have been growing in popularity in recent years, boosted by significant infrastructural investment and rising tenant demand.

It’s not just tenants who are seeing the benefits of life in the North—investors too are seeing the potential of the region, which offers significant rental yields.

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The Northern Powerhouse

Comparing with the capital

The Northern Powerhouse has been on everyone’s lips since the initiative to connect and empower the North was announced in 2014.

London was once seen as the place to live and work, but now all that is changing because of the capital’s growing unaffordability crisis.

This report has been created by Knight Knox using information that is correct at the time of print (May 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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in the short-term, whilst overall capital value increases at a steady rate to allow for a potentially sizeable return on investment in the long-term, too.

In terms of attractive locations, London has historically held rank in this department. However, whilst average UK rents rose by 2.5 per cent in 2015, prime central London rates slipped, taking the rate of

growth in this region to less than one per cent.

The North of England however, painted a much brighter picture. In the North West, for example, average monthly rents increased by 1.8 per cent in the 12 months from January 2015 to 2016, demonstrating encouraging potential for investors looking to enter the market or boost their current portfolios.

Northern cities: The North of England is one of the most exciting regions in the UK. Northern England benefits greatly from being a leading employment and manufacturing hub, and has a population in excess of 14.9m spread across major cities such as:

1. Newcastle upon Tyne

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2. Sunderland 3. Durham 4. Ripon 5. York

Regional hotspots

6. Hull

Tenants, homeowners and investors alike are looking to more regional cities to fulfil their housing needs—take a look at the hotspots.

7. Sheffield 8. Leeds 9. Bradford 10. Wakefield 17

11. Manchester 12. Salford 15

13. Chester 14. Liverpool 15. Preston

14 13

16

1 2 3 8 9 4 5

6

7 10 11

16. Lancaster

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17. Carlisle

Knight Knox Market leaders in UK property investment, Knight Knox can provide investors with the best of regional buy-to-let, with properties in Manchester, Liverpool and Leeds.

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Northern Property Guide 2016

WHY THE NORTH? Northern cities such as Manchester, Leeds and Liverpool have experienced a surge in popularity over recent years.

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ignificant investments into their infrastructures and amenities have sparked an appetite for city-centre living across the region and are continuing to drive tenant footfall to these areas, as well as cities such as Sheffield and York.

According to Deloitte’s 2015/16 regional crane surveys, the number of residential construction launches in Manchester increased by a massive 225 per cent and an even more impressive 600 per cent in Leeds. The Leeds survey saw the highest rate of residential construction starts for the city in almost a decade and has truly cemented it as a big player within the northern marketplace.

The deluge of residential property coming to market in the North of England doesn’t come down to fate, but rather an everincreasing demand from tenants for high-quality

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properties within the North’s key cities. This demand can be attributed to a well-considered formula of attractive benefits presented by the regions’ cities, which have all cleverly adapted to suit the desires of today’s society.

Economically, forecasts show that the North will continue to perform well, with a projected annual increase of 2.2 per cent thanks to the wellestablished financial and business services sector. As a result of this, employment in the region is set to grow by 1.7 per cent in the years leading up to 2020.

In the same time frame, the number of jobs in Manchester is forecast to rocket by 4.3 per cent and an impressive 2.8 per cent in Leeds, taking them well above the national average and giving people even more of a reason to settle in the region.

The introduction of

5m

Rented Households in 2015

employment and creative hubs, like Salford’s MediaCityUK and Leeds’ business and finance centre, has shone a global spotlight on this area of the UK, sparking a rapid spike in desirability and inspiring huge corporations, such as the BBC, to re-locate from the South of England.

For those still in education, the North houses an impressive number of top-quality universities, including a host of red bricks in Manchester, Leeds, Sheffield, York and the original university to coin this phrase, Liverpool.

Aside from burgeoning education and employment prospects, these cities are seen as a magnet for growth because of their thriving cultural scenes, improving transport infrastructures and high-quality leisure facilities.

The North of England is home to a string of awardwinning museums and galleries, as well as a diverse food and beverage offering, and plays host to some spectacular international festivals and events, which draw global footfall to the cities. For example, in previous years, Manchester’s Chinese New Year celebrations have drawn up to 90,000 visitors to the city – a superb demonstration of the North’s growing cultural gravitas.

With an influx of high-quality residential properties dominating the Northern cities, skylines, this is a growth that shows no sign of slowing down and the spike in construction activity demonstrates the investment opportunity presented by this region.

North West House Price Growth: 2015 - 2020 2015:

£115,594

2016:

£121,374

2017:

£126,836

2018:

£131,909

2019:

£136,526

2020:

£140,622

Total house price growth over 5 years:

21.6%

Source: JLL, 2015

ASSESSING THE BENEFITS The spectrum of factors attracting tenants to the North of England is vast and it’s clear that investors can be confident that their properties will remain tenanted. It’s not just those renting property in the region that can expect to reap the rewards, but landlords too.

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n January 2016, the Council of Mortgage Lenders (CML) confirmed that the prospect of obtaining a buy-to-let loan is positive. The most recent figures revealed that the total value of loans in 2015 stood at £1.3 billion – a 30 per cent increase year-onyear. This means that it’s easier for investors to enter the buy-to-let market and, as a result, it’s estimated this style of investment will account for around nine per cent of property transactions in 2016/17.

Yields remain vitally important to property investors and play a pivotal role in the success of any

long-standing investment.

They are used by the market to measure the potential income a property could generate each year against its value.

From 2015 to 2016, rents rose faster than property prices and, as a result, average yields have shot up.

In 2015, residential landlords across Great Britain enjoyed overall returns of more than £120 billion – a staggering figure. The average yield for the UK now sits at 4.9 per cent, whereas within the North West and Yorkshire, they sit at 7.1 and 6.4 per cent respectively – allowing investors to generate greater rental returns in

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Northern Property Guide 2016

these areas than anywhere else in the country.

The UK’s ever-growing house prices have been extremely well documented since the renowned crash of 2008. Since then, they have risen at a rapid rate, allowing buy-to-let investors to witness the capital value of their assets grow substantially. The future therefore looks incredibly bright for landlords – according to Rightmove’s House Price Index, the average price of a home hit £300,000 for the first time ever in March 2016.

The UK’s population grows by 200,000 households every year

The increase has been driven by a shortage of available housing in the UK, together with the growing population – a combination which has fuelled price hikes for the existing properties on the market.

Projections state that the UK’s population grows by 200,000 households every year, meaning that if the country is to maintain current levels of affordability, the same number of homes must be built. In order for prices to fall again, levels of demand need to decrease and the number of housing starts must exceed the number of households.

Unlike the positive state of the market for buy-to-let

loans, a huge number of would-be house buyers are unable to secure affordable mortgages. As a result, the ‘affordability crisis’ remains prevalent within the UK and a growing number of the population are turning to the private rented sector (PRS) instead.

The North of England offers a lower cost of living than the South – up to 67 per cent – increasing demand for homes and causing the region to experience an increase in development activity. Seventeen per cent of the population in the North West and Yorkshire live in rented accommodation and it is projected that, nationally, the rate of homeownership will fall to just 55 per cent by 2025 .

Liverpool

Many households will remain in the private rental market their entire lives

Leeds

This profound decline in homeownership means it’s likely that many households will remain in the private rental market for their entire lives – dramatically expanding the average life expectancy of a property investment. As a result, investors can expect to obtain longer tenancy agreements as households settle in rented properties, reducing management fees and the economic risks associated with void periods when properties sit untenanted.

Manchester

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THE NORTHERN POWERHOUSE

G

eorge Osborne first coined the phrase ‘Northern Powerhouse’ during his speech at Manchester’s Museum of Science and Industry in June 2014 and, since then, it has been an initiative that’s been firing on all cylinders. The social and economic progress has been hugely positive and momentum continues to build, which is great news for anyone considering investing capital in the North.

There are 15 million people living in the North of England, with a GVA of £290 billion. Figures even state that if the Northern

Powerhouse were a country in its own right, it would be larger than Sweden and Denmark, ranking 21st in the world.

Northern cities, such as Manchester, Leeds, Liverpool and Sheffield, are working more closely together than ever before.

They are sharing the platform created by the Northern Powerhouse to promote their huge potential for growth and increasingly speaking with one voice.

There is a growing confidence that the whole northern region is stronger when working together.

If they act as a collective Powerhouse as opposed

As outlined by the ‘Northern Powerhouse’ initiative, there are five key drivers in the mission to conquer the economic imbalance between the North and South:

1 Improving the transport infrastructure

2 Devolving powers and funding to urban

centres 3 Connecting people to boost economic

gravitas 4 Focusing on skills and education

5 Encouraging people to move out of their

comfort zones.

to individual cities, they have the potential to be a counterweight to London.

At present, £3,000 is spent on transport per head of population in London, compared to just £460 in the North West and £395 in Yorkshire. However, without transport, there can be no Northern Powerhouse and in order for the national economy to be rebalanced and the concept to be judged a success, it is essential that the North’s networks are enhanced, creating a more connected region.

There are 15m people living in the North of England, with a GVA of £290bn

Manchester is hugely important in this journey to efficient connectivity.

However, its potential can only be met by enhancing the strength of its links to Leeds, Sheffield and Newcastle.

Following proposed improvements, a train journey between Leeds and Manchester will take only 30 minutes and High Speed Rail services will reduce journeys from northern cities to the capital by up to 75 minutes, while the estimated journey time from Manchester Airport to London will sit at under an hour.

This infrastructure, if executed successfully, will be at the core of the

Northern Powerhouse’s fulfilment. It will also serve as a huge benefit for investors in the northern property market, allowing the North to be more accessible to tenants as a tangible, and significantly more affordable, place to live and work.

Manchester Airport also provides the North with impressive international links, bringing with it a valuable global audience.

The busiest airport outside London, it provides direct flights to countries such as Hong Kong, China and America, as well as to the Middle East, journeys to which are currently scheduled up to five times a day.

George Osborne’s ‘devolution revolution’, another political buzzword, has given the local leaders of Greater Manchester, Liverpool, Sheffield and the North East autonomy that they’ve never before experienced, by returning decision-making powers to the region and gives local governments more control over their individual economies and spending power.

As a result, northern cities are able to tackle issues, such as transport and skills shortages directly, to improve the region more rapidly and attract tenants and investors alike.

As the Northern Powerhouse continues to gather momentum, there has never been a more attractive time to capitalise on the North.

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Northern Property Guide 2016

COMPARING WITH THE CAPITAL

to tenants. Plus, with the Northern Powerhouse’s plans to improve transport links to and from the capital, savvy renters will know exactly how much more they can get for their money outside of London.

London is an extremely cosmopolitan city with a huge amount to offer both residents and tourists. However, for those living in the capital, this comes at a huge cost.

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ccording to 2016 figures, the average cost of living in London ranks fourth globally and the cost of getting around the city’s boroughs is more expensive than anywhere else in the world. The average monthly rent for a studio apartment is over £1,500 and monthly travel tickets sit at around £130.

Whilst London’s rental costs can generate high incomes for buy-to-let landlords, the average house price hit a record £551,000 in January 2016, having a dramatic effect on potential investor returns.

According to a YouGov survey, over a third (36%) say they’d ‘probably be better off somewhere else’, as London ‘isn’t worth the effort and expense’.

LONDON Avg monthly rent Avg asking price Yield

£1,680.70 £530,368 3.21%

LEEDS Avg monthly rent Avg asking price

Northern cites offer lower house prices for investors, as well as a significantly reduced cost of living

The cost of living in Manchester is 34 per cent lower than that of London, and figures for Leeds and

Yield

£630.50 £181,128 6.51%

Source: Monthly rent taken from Numbeo, asking price from Rightmove and yields from rentalyields.co.uk

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Sheffield stand even lower at 37 and 40 per cent respectively. However, in some areas of the North, monthly rents are as much as 67 per cent lower than the South. As a result of lower priced property, yields are up to three per cent higher – a winning formula for investors looking to build a successful buy-to-let portfolio.

YouGov, 2015

REGIONAL HOTSPOTS Urban areas within the North that continue to demonstrate the greatest potential, according to Hometrack’s UK Cities House Price Index, are Leeds, Manchester, Sheffield and Liverpool, which have all recorded a pick-up in house price growth since 2010.

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500

Completed

u/c

2017

2015

2016

2013 2014

2011

2012

2010

2009

2007

2008

2006

0 2004

For more information on investing in a northern property, call Knight Knox on 0161 772 1370 or email info@ knightknox.com.

4,500

2005

Now’s the time to seize the opportunity and begin to realise the potential return on an investment in the region!

Manchester: Residential development pipeline

2003

Factors such as these demonstrate the benefit to an investor of looking wider than their local area when building a buy-tolet portfolio, but instead focusing on a two-fold

The statistics all point towards the North of England being a highly profitable and attractive hub for buy-to-let property.

Sheffield

Liverpool

2002

Northern hotspots boast large student and young professional populations which, when coupled with optimistic employment prospects, are driving demand for property within the cities.

investment strategy: the amount of rental income received throughout the lifecycle of the investment and how much its value will have risen by when the time comes to sell.

Manchester

No. of units

E

ven more positively, these cities are still far cheaper than the South East and London in spite of their substantial growth, allowing them to stretch their capital much further.

Leeds

2002 - 2015 Average

Source: Deloitte, Manchester Crane Survey 2016

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Northern Property Guide 2016

ABOUT US Knight Knox is a leading provider of buy-to-let developments to the private investor market.

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pecialists at sourcing investment opportunities, in both new-build residences and high-end refurbishment projects, the company boasts an impressive portfolio of both completed and future stock – testament to the quality of the properties it brings to market.

The team works in partnership with four highly experienced developers – X1, Fortis Developments, Forshaw Land & Property Group and Crossbow

Investments Ltd. Nurturing relationships with these developers has allowed Knight Knox to build a track record of over 65 successful buy-to-let 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. Knight Knox’s diverse range of properties has enabled it to offer a wide range of opportunities to suit all investment needs.

The whole process from the initial reservation to the exchange of contacts up to the final legal completion is guided by their very friendly, knowledgeable and trustworthy staff. Any queries or uncertainties are answered almost instantly and they do their utmost to accommodate the clients’ needs. Overall, a truly remarkable service and I know for sure that all my future investments will be through Knight Knox.

Dr Nishil Haria

As featured in:

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KNIGHT KNOX PORTFOLIO

65 Total number of all UK projects launched

43 Number of completed and tenanted developments

£593 MILLION

Total value of all UK projects launched

Completed projects: Knight Knox has successfully delivered 43 completed developments across the UK, with particular focus on major cities in the North West, including Manchester and Liverpool.

The Gallery at X1 The Quarter | Liverpool

St. Ann’s Lodge | Leeds

The first phase of the award-winning X1 The Quarter development in Liverpool, The Gallery reinvented city centre living with its provision of 83 stunning apartments ranging from spacious studios to luxurious 3-bed apartments, all just a stone’s throw away from the city centre.

Leeds is gaining a reputation as a top student city, which is why St. Ann’s Lodge’s selection of 52 student rooms are always a hit with its student demographic. Situated close to Leeds’ two main university campuses, this student accommodation complex has its student residents in mind.

All Saints | Sunderland

X1 Salford Quays Phase 1 | Manchester

All Saints is a prime new-build student development providing the over-subscribed student market with 90 stunning studio apartments, as well as being an easy distance from all that Sunderland has to offer, including a selection of bars, restaurants, shops and the University of Sunderland.

The first in a three-phase development, X1 Salford Quays Phase 1 opened the floodgates for investment in the area. This development contains 60 apartments ranging from 1 to 2-beds, and has proved its popularity thanks to its close proximity to MediaCityUK and transport links to Manchester City Centre.

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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 (May 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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