Northern housing market defying Brexit uncertainty according to JLL
Leeds overtakes Manchester as house prices set to grow by 17% in next five years
City centre house prices and rental growth in Leeds, Manchester and Liverpool are expected to grow above the national average in the next five years, according to a new report on residential property in the North of England from property adviser JLL.
Central house prices in Leeds are expected to grow by 17% in the next five years, followed by Manchester at 16% and Liverpool at 13% compared with a national average of 11%.
Leeds is now rated as JLL’s number one prospect for residential price and rental growth in the UK. It knocks Manchester off the top spot, which the city had held firmly for the last four years.
The West Yorkshire city takes the lead as demand for housing has grown against a backdrop of low residential values and a lack of residential development over the last decade.
By 2020, JLL expects Leeds city centre’s residential property values to increase by 2.5%, compared with 0.5% nationally, with rental growth in the city expected to also grow by 2.5%. The average two-bed flat in the city cost £180,000 last year.
In comparison, central Manchester’s house prices are also expected to increase 2.5% and rental values to grow by 3% over the next year. The average sales price for a two-bed flat in Manchester city centre was £255,000 last year.
Charles Calvert, head of JLL’s residential team in Leeds, said: “Despite Brexit headwinds, the housing markets in Yorkshire has performed above the national average over the past 12 months.
“In Leeds, compared with other major cities, and more locally with York and Harrogate, residential values are typically lower. This, coupled with a fundamental lack of new development in the city centre since the Global Financial Crisis means demand is outstripping supply and we anticipate values to increase by an average of 3.3% pa over the next five years with rental growth forecast to increase by an average of 3.2% pa over the same period. This is well above the UK forecasts for 2.2% pa price growth and 2.4% pa rental growth.
“There does however remain very little development of apartments for owner occupation in Leeds. The majority of schemes that have been completed in recent years have been marketed off-plan and targeted at buy-to let investors. These schemes are relatively small in scale and the majority are office-to residential conversions. We believe that there is significant pent-up demand for high quality, highly specified new apartments within the city which will attract a significant premium over existing stock and we have buyers queueing up waiting the delivery of the first scheme to deliver this level of quality.”
JLL says a total of 29 sites in Leeds have been identified that could deliver in excess of 10,000 apartments, doubling the existing number of apartments in the city centre. However, only 45% of these developments have planning permission. This means the schemes will be delivered over several years, reducing any risk of a short to medium term over-supply. The total number of private rental apartments currently under construction totals just over 1,300 and the majority of the schemes in the pipeline are also purpose built rental developments. Legal & General’s 250-unit Mustard Wharf and Aberdeen Asset Management’s 111-unit 84 Kirkstall Road are the most recent schemes to start on site.
JLL highlights that investor demand for land in the city centre remains extremely strong driven by the shortage of supply and the focus of attention on the city as an investment opportunity. However, although there is a strong and proven need for apartment schemes for owner occupation, the majority of investors weighing up the city have private rental or student housing schemes in mind.
Nick Whitten, residential research director at JLL, added: “In recent years Northern England’s major cities have established themselves as standout performers in terms of residential investment and development.
“Growth in city centre housing supply is encouraging, but we are particularly pleased to see the diversity of homes - Build to Rent, shared ownership and aged living - all receiving greater attention from developers. It is not enough for UK cities to build more homes; they need to be the right mix of products and tenures.”
The average price and average rent for a two-bedroom apartment in Leeds remained flat in 2018 at £180,000 and £895 pcm respectively.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.