RENTAL MARKET SNAPSHOT

Transcription

1 RENTAL MARKET SNAPSHOT WHITE PAPER 2019

2 CONTENTS The UK rental market an overview 3 Rental market snapshot 4 Changing demands 5 Exciting expectations 6 Birmingham rental market snapshot 7 Manchester rental market snapshot 8 London rental market snapshot 9 Liverpool rental market snapshot 10 Newcastle rental market snapshot 11 City comparison 12 Get in touch 13

3 THE UK RENTAL MARKET AN OVERVIEW The UK rental market is characterised by strong, sustained demand. For years the country has been building homes at a slower rate than is required to house its growing population. At the same time, more and more people are renting their homes privately, rather than owning. This has led to demand for rental homes increasing, particularly in central urban areas, as a renewed period of urbanisation takes place. This, naturally, has had a knock-on effect on rents. Ancoats Gardens, Manchester

4 Hadrian s Tower, Newcastle RENTAL MARKET SNAPSHOT In 2017/18, developers delivered just over 222,000 new homes, against a government target of 300,000. That included 195,290 newly built homes (with the remainder being made up of conversions and changes of use from other types of property). The missed target is representative of the past decade or more, with the UK consistently failing to build homes at the pace required. Between 2005 and 2016, the UK population increased by five million people. In the decade to 2026, the Office for National Statistics (ONS) projects that it will increase by a further 3.6 million. The house building industry is lagging further behind each year, leading to a sustained housing shortfall. In terms of changing tenure, the private rented sector accounted for 20% of English households in 2016/17. It has double in proportional terms since 1996/97, going from 2.1 million households renting privately back then to 4.7 million in the latest English Housing Survey. This has combined with a lack of new housing stock coming online fast enough to create strong demand for rental properties. +5million UK population increased by five milion people between ,000 Developers delivered 220,000 new homes against a government target of 300,000 in 2017/18 4.7million Latest number of UK households renting privately according to English Houisng Survey

5 CHANGING DEMANDS At the same time, the types of properties that renters are seeking are changing. Renting used to be a stepping stone between leaving the parental home and purchasing a home of your own. Now, it s increasingly common for renters to spend years, if not decades, in rented accommodation, placing yet more demand on the available stock. Those who know they will be renting for some time have different demands from those who were happy with more of a stop gap solution. Quite simply, modern renters want more better locations, more spacious or luxurious homes and superb on-site facilities, for a start. What s more, they are prepared to pay the additional premiums that such amenities command. Central locations are now top of many renters list of demands. According to Statista, 83.14% of the UK s population lived in cities in 2017, with the figure having risen steadily from 80.48% just a decade previously.

6 EXCITING EXPECTATIONS These trends of undersupply, rental sector growth and urbanisation led to rents rising by 1.0% nationally in 2018 and the CBRE 2019 UK Real Estate Market Outlook predicts further rents over the coming years with a compound of 11.4% between 2019 and 2023, as demand for rental homes increases. UK RENT FORECAST, 2019 TO 2023, %, ANNUAL & CUMULATIVE 12% 11.4% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1.3% 1.9% 2.5% 2.7% 2.6% 1% 0% (compound) With city rental markets expanding so rapidly and creating some exciting property investment opportunities as a result, we ve analysed five of the country s key urban areas, to look at how they re performing. Welcome to the 2019 Surrenden Invest Rental Market Snapshot!

7 BIRMINGHAM RENTAL MARKET SNAPSHOT Birmingham, England s second city, is a thriving metropolis with a busy rental market. It is the destination of choice for those migrating out of London, as well as for many of those in the West Midlands who are seeking economic good fortune. With a 65,000-strong student population, the city experiences rental property demand at every level, from academics to professionals and their families. BIRMINGHAM The age breakdown of those arriving from London is also significant, indicating that, while a large number of those of student age are attracted to the city due to its high quality universities, a significant number of movers are also young workers and families. Knight Frank 65,000 Birmingham is home to five universities and 65,000 students The city has a thriving economy, with one of the largest business concentrations in the country. The finance, insurance, health, education and defence sectors make up the lion s share of the economy, as well as a dynamic digital/tech scene and a strong tourism sector. All of these draw young people to the city and help to bolster its booming rental market % Property values up by 2.19% over past 12 months and by 30.21% over past five years BIRMINGHAM IN NUMBERS When it comes to rental market values, the average Birmingham property commands 841 pcm (as at January 2019, according to Zoopla). Rental apartments garner higher incomes than houses, reflecting the fact that tenants are prepared to pay more for homes in key city centre locations. Areas like Digbeth, for example, are at the heart of the action, with residents able to enjoy an exciting urban lifestyle that sees them benefitting from the energy and creativity that this part of the city exudes. From a landlord s perspective, Birmingham is an excellent prospect. According to Direct Line for Business, Birmingham has the lowest tenant turnover of any English city, with the average renter staying in their home for two years and four months. It also has the lowest void period, at just 11 days, compared to a national average of 22 days. Both of these factors make a significant difference when it comes to how much investors can earn from a rental property. 841pcm The average property rental value in Birmingham according to Zoopla 2YEARS+ Average renter staying for two years and four months according to Direct Line for Business

8 MANCHESTER RENTAL MARKET SNAPSHOT Over the last four years, the cost of renting a home in Manchester has shot up by a staggering 30%. In the year from October 2017 to September 2018 alone, rents in the city rose by 7% compared to the same period in 2016/17. Despite the increase, the North West region remains the second cheapest place in the UK in which to rent a home privately. MANCHESTER Manchester, Bury and Salford have seen the biggest rent rises over the past few years with the average rents for all types of property in Manchester increasing by a staggering 30 per cent since and seven per cent on last year. Manchester Evening News +30% Manchester rental cost rise over the last four years Part of Manchester s appeal to renters is its exceptional business environment. A 2018 report by UHY Hacker Young revealed that the city creates 79 new businesses per 10,000 population 50% higher than the national average. In recent years, a number of high-profile office openings and relocations to Manchester (the BBC, Google, Amazon and Microsoft among them) have highlighted the city s ideal mix of low-cost premises and superb urban lifestyle. The media hub of Salford, with its emphasis on all things creative, the trendy cultural zone that is Ancoats and the bustling central business district offer an incredible array of employment and entrepreneurial opportunities to the city s professionals. Manchester also has a large student population, ensuring that future generations continue to feed into the city s economic success. MANCHESTER IN NUMBERS January 2019 Zoopla data reveals an average asking rent of 1,316 in Manchester, with apartments commanding notably higher rents than houses with comparable numbers of bedrooms. Manchester s population is projected to grow by 14.1% between 2018 and 2041, according to the ONS s subnational population projections and the resulting increase in demand for rental accommodation in the city sets the scene for further rent rises over the years ahead. The average tenancy in Manchester lasts for one year and four months, according to research by Direct Line for Business, with the average void period standing at 29 days. Interestingly, Manchester has a lower rate of tenants vacating their property before their tenancy is up than the UK as a whole, at 7% and 9% respectively, which is excellent news for those who own rented accommodation in the city. +50% 79 new businesses per 10,000 population, 50% above national average 1,316pcm The average property rental value in Manchester according to Zoopla 1YEAR+ Average renter staying for one years and four months according to Direct Line for Business

9 LONDON RENTAL MARKET SNAPSHOT The UK s capital city, London is a hotbed of rental activity. According to the most recent census, 36.7% of London s population is foreign-born, as the city draws in talented young people from around the world due to its outstanding economic opportunities and cultural attractions. London s financial services sector is renowned throughout the world, as are the city s myriad tourist attractions, which together attract around 19 million visitors to the city per year. LONDON London also has outstanding academic credentials, with institutions such as Imperial College London, University College London, King s College London and the London School of Economics and Political Science attracting the brightest young minds from around the world. Many of these young people then stay in the city once they graduate, providing London with a fresh, dynamic talent pool that feeds into its thriving economy. SPECIAL MENTION LONDON COMMUTER BELT London is such an expensive city to buy and rent in that a vast commuter belt has grown around the city. This area continues to expand as the capital s transport connections grow and improve, such as with the addition of the new Elizabeth Line, which opens over the course of This means that renters have additional options available to them, with affordable private rented sector housing in commuter belt areas meaning that they can live in larger homes than they would otherwise be able to afford, while still enjoying journey times of under 30 minutes to central areas. LONDON IN NUMBERS Just 47% of Londoners own their homes, so demand for rental accommodation across the city is huge. Unsurprisingly, therefore, the average void period is below the national average, at just 20 days (versus the UK-wide average of 22 days). London s renters also tend to stay in their homes for a little longer than the national average, with average tenancy lengths of one year and nine months and one year and six months respectively. Being such a vast city, London has a huge range of prices when it comes to rented accommodation. Considered as a whole, based on Zoopla s January 2019 data, the city s average asking rent stands at 3,195 pcm. Apartments of all sizes command higher rents than comparable houses, with the average one-bedroom apartment having an asking rent of 1,778 pcm and the average two-bed standing at 2,693 pcm. With notoriously high house prices, London is a city with a private rented sector that is going from strength to strength. Prime central London saw rent growth of 1.1% during 2018 higher than the national average of 1.0%, according to the ONS. And with strong demand for rental homes in the city unlikely to taper off any time soon, it is reasonable to expect this trend to continue during million 19 million visitors attracted to the city per year 3,195pcm The average property rental value in London according to Zoopla 1YEAR+ Average renter staying for one years and six months according to Direct Line for Business As a result of rising rents and downwards pressure on prices, average gross yields in prime central London have risen to 3.35% in December the highest since April Knight Frank

10 LIVERPOOL RENTAL MARKET SNAPSHOT Liverpool is one of the UK s most popular cities, both as a place to visit and as a place to live. It has a superb cultural and entertainment scene, with deep music industry roots. It also has a thriving business environment, having risen from a glorious past of ship-building and international commerce to establish itself as a renowned centre for technology, medicine and science. LIVERPOOL Liverpool s population grew by 5.5% between the 2001 and 2011 censuses and is projected to grow by a further 12% between 2018 and 2041, according to the ONS. Growth has focused particularly on the city centre, which grew by 181% between 2002 and 2015, during which period it was the fastest-growing city centre in the UK. By 2020, the city centre population is expected to reach 50,000, fuelling demand for private rented accommodation in key central locations. 50,000 Liverpool s city centre population expected to reach 50,000 by 2020 LIVERPOOL IN NUMBERS Liverpool s tenants tend to stay a little longer than the national average tenancy length, at one year and seven months (versus the national average of one year and six months). They are also less likely to end their tenancies early, with just 6% doing so, compared to 9% nationally. Average void periods in Liverpool stand at 33 days, according to Direct Line for Business, though this is significantly lower for properties that meet renters expectations (with new build city centre apartments doing just that). Zoopla reports an average asking rent of 872 pcm in Liverpool as at January As is the case in other UK cities, apartments tend to command higher rental incomes than houses, in many cases reflecting the superior location and on-site facilities that apartments are able to offer. Just 47% of Liverpool s residents own their houses, compared to a national average of 63.4%, with 30% of the city s population living in the private rented sector. In this fast-paced city, bright new city centre apartments have excellent appeal, attracting renters who demand the best from their central Liverpool homes. Liverpool needs between 24,000 and 27,000 houses by Crucially, we need a better blend of properties, given our inheritance of too many older, smaller terraced houses. Joe Anderson, Mayor of Liverpool 47% Only 47% of Liverpool s residents own their houses, compared to 63.4% national average. 872pcm The average property rental value in Liverpool according to Zoopla 1YEAR+ Average renter staying for one year and seven months according to Direct Line for Business

11 NEWCASTLE RENTAL MARKET SNAPSHOT The largest city in the North East region of England, Newcastle is a bustling modern metropolis with a busy private rented sector. Famed for its literary past, friendly people, nightlife and emerging digital scene, the city is a melting pot of entrepreneurialism, business and academia. Its economy is a leading light in the North East and it is significant that Newcastle was chosen as the host city for 2018 s Great Exhibition of the North. NEWCASTLE As a result of its excellent entertainment options and cultural credentials, along with its fast-paced business environment, Newcastle draws in young people from across the region, many of whom are seeking contemporary rental homes in city centre locations. This has led to the recent rapid expansion of Newcastle s private rented sector, which they city council has recognised as an essential means of retaining talented graduates and young professionals who might otherwise have to move out of the city to find suitable/affordable homes. The private rented sector is also key to housing Newcastle s student body, as the city s two universities attract some 60,000 students, while providing just 7,300 units of student accommodation. NEWCASTLE IN NUMBERS Just 49.5% of Newcastle s residents are owner occupiers, compared to 63.4% nationally, meaning that the city has a larger proportion of renters than many locations around the UK. In total, 19.1% of Newcastle s residents are house in the private rented sector, well above the national average of 16.8%. Demand is strong for private rented homes and the city is working hard to meet that demand. Between 2002 and 2015, its private rented sector grew by 19.1% according to Newcastle City Council data. As at January 2019, the average asking rent in Newcastle stood at 977 pcm according to Zoopla, with apartments commanding significantly more income than houses. With population growth of 7% projected by the ONS between 2018 and 2041, the city s private rented sector is going to be under pressure to keep up with demand over the coming years, with an average of at least 1,000 homes per year needed between 2015 and 2030 in order to lay the foundations for housing all residents appropriately. High quality new homes in the right places will enhance labour mobility and facilitate future local economic growth. Well planned housing development will also support the city s ambition to attract and retain professionals and graduates 60,000 Newcastle s two universities attract around 60,000 students +19.1% Newcastle s private rented sector grew by 19.1% between pcm The average property rental value in Newcastle according to Zoopla 49.5% of Newcastle s residents are owner occupiers, compared to 63.4% nationally. and to grow our own skilled workforce. Newcastle City Council

12 CITY COMPARISON Birmingham Manchester London Liverpool Newcastle Population (ONS, 2018) 1,147, ,500 8,965, , ,400 Average asking rent: one-bed apartment (Zoopla, Jan 2019) 652pcm 625pcm 1,778pcm 496pcm 558pcm Average asking rent: two-bed apartment (Zoopla, Jan 2019) 889pcm 971pcm 2,693pcm 720pcm 786pcm Proportion of private renters 17% 26.9% 30% 30% 19.1% Average rental yield (Telegraph/ Knight Frank, Dec 2018) 5.2% 5.8% 3.35% 7% 6%

13 ABOUT US Surrenden Invest is a property investment company specialising in UK property investment. We provide end-to-end property portfolio management. We are a mixed team of property investors, property sales and lettings professionals and experts from the financial industry. We offer a unique blend of property and financial skills in order to best serve our investors. Our focus is on providing the best deals for our investors in the right locations. If you would like to know more about buy to let investment, we are here to help. We can answer any questions you may have and suggest properties that pair with your requirements. Simply contact our expert team in order to take your property investment ambitions to the next level.

14 Riverbank House 1 Putney Bridge Approach Fulham London SW6 3JD London Office: info@surrendeninvest.com We make no representation or warranty of any kind with regard to the information contained in this brochure and none of the information shall be treated as financial advice. The information is not an invitation to invest and you must rely entirely on your own investigations and due diligence before making the decision to invest. Any opinions expressed in this document are not statement of facts.