Liverpool In The Limelight

18 January 2017

The budding potential of Liverpool’s property market is hard to ignore. On the eve of our first investment in the city, we outline the key drivers behind this growth.

Manchester has long been viewed as the engine room of England’s Northern Powerhouse, but neighbouring city Liverpool is driving substantial growth across the region. In this Market Update, we explain why there’s no time like the present to consider the emerging investment opportunities presented by this illustrious maritime city.

A core city in the heart of Northwest England – one of the UK’s fastest growing regional economies outside of London – Liverpool is home to businesses worth more than GBP121 billion. Liverpool recorded “the strongest growth of any Northern Powerhouse core city region in the last two years”, according to the Office for National Statistics, equating to Gross Value Added (GVA) of GBP29.5 billion.

A number of diverse industries contribute to its thriving economy: it has the second fastest growing digital and creative sector in the UK, set to expand 119% by 2020, and the UK’s largest wealth management centre outside London, handling over GBP13 billion in assets. With a population of 83,000 that is projected to increase to 1.6 million by 2040, and 100,000 new jobs and 20,000 businesses created in the same period, demand is set to grow further, and along with it property prices which currently remain under their pre-recession high.

Investment and regeneration

During the rise of the British Empire, the port city of Liverpool played a major role, and its maritime importance is coming to the fore once again. It is currently the largest port on the west coast of the UK and hosts five of the six largest shipping lines in the world. It is also benefitting from GBP300 million of regeneration investment following which it will become one of Europe’s largest super container ports capable of handling 95% of the world’s cargo ships. The docklands area of Liverpool will also undergo a GBP5.5 billion redevelopment as part of the mixed-use Liverpool Waters project.

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In addition, Liverpool is at the centre of the British government’s GBP7 billion investment to help cities in the north of England ‘pool their strength and take on the world’, according to Prime Minister Theresa May who has confirmed her support of the initiative.

Enhanced connectivity is on the cards, to encourage greater collaboration between the major cities of the North, with new and improved transport links and investment into science and innovation, education, the arts and technology sectors. A total of GBP340 million is planned for the Liverpool City region as part of Network Rail’s Northern Programme to be completed in 2019, which will enhance the speed, frequency and reliability of train services, with the number of passengers forecast to increase 100%.

An already well-connected Liverpool should also see shorter journey times to London (down from 2 hours, to 92 minutes) when HS2 (High Speed Rail 2) is delivered in 2033, with reduced journey times to Manchester and Birmingham too via the HS2 station at nearby Crewe.

Supply and demand

With plenty planned for Liverpool in terms of investment and regeneration, the supply of property was also supposed to increase, with a 2016 construction target of 6,500 new homes – up 50% when compared to the previous year. However supply of property in Liverpool was 25% below that target for 2016. As of November 2016, the number of new homes proposed in the city centre doubled to almost 9,000.

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Demand for property remains strong, with 6% price growth from June to September 2016 reflecting that. Demand is likely to rise further as the population of Liverpool is predicted to grow from 83,000 to 1.6 million by 2040.

Rental demand is strong too. With a 60% graduate retention rate and growing technology and science and digital sectors, many young professionals are attracted to the city. Low business occupancy costs provide opportunities for start-ups and small-to-medium enterprises (SMEs) too.

Over GBP500 million has been committed to these SMEs in Liverpool as part of the Northern Powerhouse Investment Fund (NPIF), which aims to help these businesses achieve their growth ambitions, revitalise local economies and create jobs.

As well as the fresh graduates and young professionals that these opportunities are attracting, the city is home to around 66,000 students studying at Liverpool’s three universities that include the University of Liverpool, an institution set to double its GBP114 million long-term research projects. The number of applications to study in the city grows each year. According to Logic Estate, current demand should continue to match and potentially outstrip supply and increase values further, particularly in the city centre.

The rental market

Rental yields in Liverpool are some of the highest in the UK at up to 7%. Over the 12 months to June 2016 there was also 6.4% rental growth. In 2015, rental growth of 11% was recorded, with 16% rental growth expected by 2021. It’s not surprising therefore that alongside Manchester, Lendinvest has ranked Liverpool as one of the best buy-to-let cities in the UK.

Liverpool’s future

Since celebrating its 800-year anniversary in 2007 and being named the European Capital of Culture in 2008, Liverpool has established itself as an attractive place to visit and to live. Further planned regeneration and a growing economy suggests that its appeal will continue to grow. Yet property prices remain affordable, particularly when compared to buying in the South of the country or in central London, and there remains room for growth with property prices currently 6% below their pre-recession peak. Liverpool’s future is bright as this upward trend in property prices is forecast to continue.

Roxanne O'Fee

Written by Roxanne O'Fee

Roxanne' analysis of key UK, European and Australian markets has served as the foundation for some of IP Global's most important investments, and has seen her play a central role in the business’ UK regional cities strategy. Roxanne’s work has also extended to the project management of several key investments, and sees her currently involved with the company’s real estate fund operations.

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