Buy-to-let Boom Set For Long Stay

With average house prices breaking the £200,000 barrier, the buy-to-let boom is set to continue as first-time-buyers are ruled out of the market and forced to continue to rent, particularly in cities such as Liverpool and Manchester, where home-building remains low.

Buy-to-let Boom Set For Long Stay

A recent survey by Santander found that 55% of respondents do not expect to be homeowners when they have their first child, determining that today’s young generation of renters expect to fund the buy-to-let boom for generations to come.

This percentage is a result of the increasingly tight-grip approach banks now take to giving out mortgages, in a time of austerity, forcing many young professionals to prepare for years in the private rented sector. The number of first-time buyers in England has now, in fact, fallen to 200,000 per annum, a staggering drop, when you consider these numbers were at 600,000 in 1999 according to Jones Lang La Salle.

Conversely, buy-to-let mortgage lenders offer a much more free-handed approach, with £16.4 billion being lent to savvy investors, who saw the financial rewards and longevity of the market, in 2012.

This has not slowed down in the second quarter of 2013, with 40,000 mortgages worth £5.1 billion, being given to buy-to-let investors, according to data published by the CML; determining that both the number of buy-to-let loans, and the value of lending, were at their highest level since the third quarter of 2008.

Although rewards are strong for landlords investing in the buy-to-let market across the country, LSL confirmed in their buy-to-let index for April 2013 that rewards were in fact the strongest in the North West, where yields were highest. The index documents that the North West produced yields of 7.2%, topping London’s 5.0%, and an average rent of £568, outshining the average rents of near counterparts Yorkshire and the North-East.

Two cities which contributed largely to the North West’s table-topping performance, in terms of buy-to-let, were Manchester and Liverpool.

Case Study: Manchester

Voted by Britons as the Nation’s second city in a survey by the Trinity Mirror Data Unit, Manchester is a city bursting with renters, some who live there to avoid commuting to work, some who are studying at University and some, who well, just enjoy the experience of living in a place awash with culture and entertainment.

Investors can purchase units at a relatively cheap price in Manchester, when compared to other cities, yet still claim average gross rental yields of 7.6%, with renters willing to pay high prices to reside in this cultural hub. HSBC also named Manchester as a top four UK buy-to-let-hotspot in a study carried out this April, confirming the high-performing rents that landlords can retain when investing in Manchester. Investors can also expect to receive these high-performing rates over a long period of time, with the National Housing Federation predicting that rental rates will grow in the city by 36% by 2018.

Case Study: Liverpool

Liverpool is an area which is failing to supply the increasing amount of private renters, who desire to live in this thriving city.

Although rental stock in Liverpool has grown by 79% between 2001 and 2011, this is proving inadequate in housing the city’s growing population, which has mushroomed by 5.5% over the last decade to reach 466,400.

In a bid to counter this surging demand from private tenants, the Mayor of Liverpool has pledged to deliver 5,000 new homes in the city and, with statistics from Shelter revealing that the average single person in the city needs nine years to save the deposit for a house, while the average couple need four years, this influx of properties is sure to be needed for rental stock.

The Solution?

More purpose-built student accommodation has been heralded as the answer to an increasing demand for rental stock.

Real-estate adviser Savils Plc argued in a report that the ever-increasing amount of HMOs (Houses in Multiple Occupation) are inflicting a damaging restriction on the housing supply, making the call for more purpose-built student accommodation as a solution to free-up social housing and rental stock, one of critical importance.

We, here at Knight Knox International are in agreement with this rallying call, having sold properties in areas such as Manchester and Liverpool where student demand and housing shortages are concentrated.

In reaction to this increasingly urgent shortage, we have put ourselves at the forefront of construction, building purpose-built student accommodation, such as X1 Chapel Street in Manchester, to free up HMOs.

We have also added more residential stock through refurbishments and construction, avoiding using rental stock already on the market, which would be detrimental to local markets considering the demand for more local housing.

In Manchester we have recently launched residential stock at X1 Town Hall, which is already 75% sold out within only a month of launch, highlighting that investors see Manchester as an area ripe for investment and Merebank Court in Liverpool, which is already over 60% sold out,again, highlighting the demand for good quality rental stock in Liverpool.

To enquire about our residential and student accommodation properties in Manchester and Liverpool please contact our buy-to-let experts on +44 (0)161 772 1370


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