Growth location focus: Manchester
Manchester is the UK’s media hub, with MediaCityUK in the Salford area of the city acting as a magnet for creative talent, as well as the ideal incubator environment for new creative and digital start-ups.
As an eminently desirable urban location, Manchester is experiencing rapid population growth. The city’s 2018 population of 553,500 people is expected to grow to 631,500 by 2041 based on current trends – an increase of 14.1% according to the ONS.
“One reason that Manchester is such a key growth location is the city’s unique combination of economic opportunity and superb urban lifestyle. This blended offering led The Economist to crown Manchester as the UK’s most liveable city in its 2018 Global Liveability Index.”
The Greater Manchester urban area accounts for 40% of total GVA in the North West, making the city the focal point for the entire region. According to Savills, that region will lead the UK in terms of house price growth over the next five years, achieving compound growth of 21.6% by 2023. 2020 in particular looks to be an exciting year based on the Savills projections, with the North West tipped to enjoy house price growth of 6.0% over the course of the year.
Capitalising on this population growth is the Middlewood Corridor located in between Manchester and Salford, The Middlewood Corridor is the largest of three regeneration corridors (with over £1 bn of regeneration planned) that make up an ambitious renewal programme for Manchester and Salford. It is being built around existing retail parks, with regeneration work running from 2015 to 2030.
Middlewood Plaza is located in the heart of the Middlewood Corridor, marking the start of a new era for Manchester’s residential sector and those who invest in it. The development is set to capitalise on the enormous economic potential of the Middlewood Corridor Regeneration Zone, as well as benefit from the host of amenities that the completed district will provide. With prices starting from £157,281 and only 10% payable on exchange, this could be the development that gets you on the Manchester property market.
Buy-to-let Borrowing for an Ageing UK Population
Traditionally borrowing gets harder as you get older, but it is now getting easier to secure a buy-to-let mortgage when you’re over 60. This doesn’t mean over 60s can’t get a mortgage. But lenders might impose an age limit for taking out the mortgage, plus a maximum age for when the mortgage term will need to end.
When it comes to buy-to-let, retired borrowers may have previously found it difficult to secure a mortgage to purchase a buy-to-let property. Lenders were reluctant to offer them finance, particularly if they were still in debt in their retirement.
With around 1,000 mortgage deals available for terms of up to 40 years, which means a buy to let borrower aged 45 years old can easily expect to have a mortgage on a private rented home for 45 years. This seems to be working as the latest buy to let mortgage data from lender trade body UK Finance reveals landlord remortgages are outnumbering loans to buy new homes to let by nearly three to one. Borrowing to buy a new property to rent dropped by 7.7 per cent to 4,800 for the 12 months to the end of February 2019. Remortgages were up 2.1 per cent with 14,400 loans agreed over the same term.
“While theoretically age should not be as big a concern for Buy to Let lenders as for a residential property, the reality is that it is still a factor and many borrowers do face upper age limits. When it comes to BTL mortgages, repayments aren’t usually covered by pension savings or work salary as with residentials. Instead, affordability will usually be determined by the expected rental income from tenants (alongside the usual factors such as loan to value and other individual circumstances).”
Online Mortgage Advisor
Buy-to-let lenders are encouraging borrowers to stay in the market well into retirement as they lift age limits on mortgages. Figures from consumer group Which? suggest two out of three of the 2,057 deals available to landlords have a maximum age limit of at least 85 years old. Some go farther – with 9 per cent offering mortgages to borrowers up to 90 years old and a fifth without any age limit at all.
Age limits might still be a factor, but when it comes to determining whether a buy-to-let investment is affordable or not, many lenders will focus more on the rental cover than the age of the borrower. As long as borrowers can demonstrate that the monthly rent payable on the property is enough to cover mortgage repayments by between 125% and 145%, the investment will be determined as affordable.
With the population living longer, people are still wanting or needing to borrow money for a multitude of reasons. Now lenders aren’t standing in the way as the number of buy-to-let products available on the market is at its highest level since the beginning of the financial crisis in 2007, with many of these products will be available to landlords requiring finance, regardless of their age.
London House Prices increase as Boris Johnson moves forward with stamp duty tax reform
As we look towards the October Brexit dead line, what is the current state of the UK property market and what effect has Boris Johnson had in the small time he has been prime minster.
Before Boris Johnson became the new PM, he outlined his plans for an emergency budget which would significantly cut stamp duty and potentially reignite a stumbling property market. As Brexit, economic uncertainty and fulfilling policy pledges play heavily on his mind, overhauling SDLT will undoubtedly be the easiest part of Johnson’s role as PM. In his quest to revive the property market, Boris pledged to overhaul the current SDLT thresholds by scrapping SDLT on properties worth less than £500,000. Currently, only properties priced under £125,000 on all current property owners or a £300,000 threshold for first-time buyers (FTBs) are immune from SDLT. The aim to stimulate the more expensive sections of the property market by reversing duty increases on homes valued over £1.5 million by reducing the 12% duty to 7%.
The Current Market Conditions
Average house prices saw an annual rise of 1.2% (to April 2019 Gov.UK House Price Index)
Highest level of year-on-year growth in followed by Liverpool (4.9%), Manchester (4.1%) and Birmingham (4.0%).
According to the same dataset, London saw a 0% change in house prices. (Hometrack UK Cities House Price Index)
Despite the ongoing Brexit-induced pessimism, the latest Royal Institute of Chartered Surveyors (RICS) report stated that there has been an increase in buyer enquiries after declines over the first half of 2019. 12-month expectations are indicating continued growth in sales volumes and prices.
Nevertheless, affluent home buyers pushed the number of deals in central London over £5 million up 12% compared to a year ago, while the number of deals under £2 million rose 16%, according to LonRes. With Boris Johnson beating rival, Jeremy Hunt by 92,153 votes to 46,656 last month, the question on everyone’s lips is whether he will deliver on his promise of cutting stamp duty land tax (SDLT) after October 31st 2019.
How long will the London housing market pause for thought?
There are a number of indicators that the pre-Brexit, pent up buyer demand for London property is shortly to be unleashed. Chestertons’ Winter 2018/19 London Residential Property Market Report asserts that the “bottom of the market may be in sight,” while the rate of decline in the capital’s sales prices have slowed. Indeed, demand at the prime end of the market bounced back during the latter half of 2018.
“We’ve seen many buyers – both owner-occupiers and investors – taking a ‘wait and see’ approach in London as the Brexit deadline of 29 March approached. However, the delaying of that date to 12 April – and the 31 October – is testing purchasers’ patience. Add in the prospect of prices in London bottoming out and we could see a swift and decisive rise in transactions over the coming weeks and months.”
Prices in London fell during 2017 and again during 2018. Given the ongoing political impact of Brexit on sterling, this has made for some interesting opportunities for overseas investors. With indications that the market is bottoming out, many investors will now be looking to snap up properties at bargain (for London) prices while they have the chance.
At the same time, it’s likely that many of those waiting to buy property for their own use will also act in the coming weeks and months. As Brexit looks increasingly likely to drag on, many would-be purchasers may be prompted to act before London’s prices begin to rise too steeply again. As such, 2019 – or at least the latter half of it – could turn out to be a good year for property in and around the capital.
“Many property investment companies are looking closely at London again right now, as the market correction that has taken place over the past couple of years makes property ownership in the capital more attractive, particularly given the recent upward movement in rents and therefore yields. As such, London and the commuter belt certainly bear watching over the rest of this year.”
London’s property market is, of course, vast, as is the commuter belt that surrounds the city. Two areas likely to be of particular interest in the near future are Gerrards Cross and Reading, both of which offer a fast, direct commute into central London, as well as a good quality of life for the whole family. If the predictions of the market bottoming out and pent-up demand being unleased play out, it is likely that interest in both of these areas will spike significantly.
The investment case for Luton
Luton is a growing town that is known for being one of London’s most sought-after commuter locations. Indeed, Jackson-Stops has just flagged it up as the top commuter hotspot for 2019 and the town is fast becoming a favourite with property investment companies. Here’s why.
Luton is located 30 miles north west of central London. Direct trains run into London St Pancras International in as little as 22 minutes. 167 trains per day provide an almost round-the-clock service. Rents, meanwhile are around 1/3 of the cost that they are in London. For renters, it is the ideal combination.
Not only that, but London Luton Airport (the fifth largest in the UK and the fastest-growing major London airport) provides the town with easy, fast access to a wide range of European destinations, as well as select locations in Africa and the Middle East.
“Life in Luton means easy access to the best that London has to offer but without the capital’s extortionate housing costs. The town has excellent amenities with a lively local culture that appeals to those looking to balance access to London with a realistic lifestyle. This is one of the reasons that Luton exhibits such excellent growth potential.”
Luton’s population is increasingly rapidly. Between 2018 and 2041, the Office for National Statistics projects that the town’s population will grow by 12.9%, to 248,500. At the same time, it is in the grips of a serious housing shortage, as is the case with many towns and cities in the UK. However, Luton’s housing shortage is worse than most, with Project Etopia projecting that it will be 22.1 years behind where it needs to be in terms of housebuilding by 2026, if the current rate of development continues. At present, Luton is building 430 new homes per year – it needs to be building 1,417 to meet demand.
This housing shortage spells good news for buy to let investors, as it points to a long-term, sustained level of demand for private rented accommodation in Luton, as tenants seek to snap up those homes that are available. It also has the potential to drive up house prices (as well as rents and yields). Luton is already bucking the trend in terms of house price rises. While many southern locations are seeing a market correction at present, with falling prices or nil growth, Luton’s prices rose by 1.6% in the year to April 2019. Savills, meanwhile, projects growth of 9.3% in the five years to 2023 for the South East region.
In terms of its rental market, Luton enjoys an average rent of £632 pcm for a one-bedroom apartment and £828 pcm for a two-bedroom one, according to Zoopla – significantly less than equivalent homes in London.
“It is Luton’s combination of capital growth potential and pent-up demand for private rented sector homes that has caused the town to top LendInvest’s UK buy to let index for so much of the past three- or four-year period. This is a town with outstanding growth potential. Watch this town and watch this space to take full advantage of what Luton has to offer in the very near future!”
Is property investment the key to retirement for Millennials?
It’s fair to say that Millennials have had something of a raw deal when it comes to their finances. According to Brookings, median household wealth for Millennials in 2016 was 25% below that of those who were a similar age back in 2007. The global financial crisis has held them back in terms of salary growth, but it’s far from the only factor. Growing levels of student debt have played a large role, as has an inability to climb onto the housing ladder.
The result is that Millennials are facing a number of issues, both in terms of current wealth creation and future prospects. Not owning property means no capital growth. The increasing prevalence of self-employment more often than not means a lack of savings for retirement. Interestingly, though, this doesn’t mean that Millennials are unable to use the property market to their advantage.
“Millennials face a number of economic hurdles, but property investment doesn’t have to be one of them. The average UK property costs eight times the average salary, according to the ONS, but the right buy to let home in the right area can cost considerably less. It can also generate a healthy income, as well as the potential for capital growth.”
The Tannery, in Liverpool, is a key example of the potential that property investment holds for Millennials. The apartments are available from just £85,000 – far below the UK average property price of £226,798 (Land Registry figures, March 2019). With a turnkey management solution in place, there is no burden placed on investors in terms of time, meaning that Millennials looking for an alternative to traditional pension arrangements would do well to consider such a property’s potential.
Buy to let mortgages are subject to affordability checks, just as mortgages for first time buyers are. They also consider the potential rental income of the property in question. Surrenden Invest’s mortgage calculator is a great place to start for those just looking into this (whether Millennials or not).
“The world as we knew it has changed when it comes to property ownership. We’re seeing more people renting and for longer periods, but that doesn’t mean that they need be denied the opportunity to profit from property. It’s just that doing so may look different in the future. Property investment companies need to work with Millennials to encourage that to happen.”
Luton’s dynamic business environment and what it means for investors
Luton is a large town in Bedfordshire, some 29 miles northwest of London. It has a diverse economy that has built on the town’s industrial past while embracing new sectors and technologies. This exciting business environment, combined with the town’s affordability and proximity to London, is causing investors to look closely at Luton right now – so that’s precisely what we’ve done!
In terms of its business environment, Luton’s principal employers, after the borough council and Luton and Dunstable University Hospital NHS Foundation Trust, are those whose businesses relate to aviation: Aircraft Service International Group, EasyJet, Menzies Aviation, TUI and more all employ between 1,000 and 2,000 people. The University of Bedfordshire is also one of the town’s notable employers, with a similar number of staff.
As well as the aviation industry, Luton has a thriving new enterprise scene. So much so, in fact, that the town ranked fourth in the Lambert Smith Hampton UK Vitality Index in 2018 – the first time it had been included in the report. Lambert Smith Hampton analysed 66 towns outside of London in order to identify those that provide the greatest opportunities for businesses expansion and are best positioned for growth.
“It’s great news to see Luton ranking in The Vitality Index’s Most Entrepreneurial list for the first time and it’s testament to the inward investment that it is attracting, as well as the commitment to improving the local economy.”
Lloyd Spencer, Head of Office for LSH Milton Keynes and Luton
Luton ranked highly due to its supportive business environment and high number of new enterprises per capita (it had the highest number out of all 66 locations). London Luton Airport Enterprise Zone – one of only a couple of dozen enterprise zones in the UK – played a key part in the ranking. The enterprise zone, which was announced in late 2015, has attracted more than £1.5 billion in private sector investment, creating thousands of jobs and driving forward a programme of local infrastructure enhancements.
“What we’re seeing in Luton is a town that already has a busy economy thanks to the presence of London Luton Airport, but one where entrepreneurial spirit is flourishing as well. For buy to let property UK investors, this is excellent news, as Luton has all the right elements to draw in bright, talented young professionals and thus fuel demand for centrally located rental homes.”
Those founding their own companies are benefitting from Luton’s enterprise zone effect. The June 2018 Luton Gross Disposable Household Income report, from Luton Business Intelligence, reveals that earnings from self-employment have risen in relation to the national average in recent years, as the town’s entrepreneurs play their part in its economic success.
Not only is Luton well regarded for its entrepreneurial credentials, the town also ranks highly when it comes to environmental issues. The UK Vitality Index placed it fourth in its top ten greenest locations ranking, with Luton performing well in areas such as CO2 emissions per capita, energy consumption and household recycling.
Those looking to capitalise on Luton’s superb market fundamentals are invited to consider The Orion. Just minutes from Luton station and town centre, the development is ideally positioned for those commuting into London, as well as those working in Luton itself. The one- and two-bedroom apartments have been designed with luxury firmly in mind, with high specifications that will appeal to tenants looking for contemporary homes in a great location. Prices start from £172,900, which is 10% below the value of comparable homes on the market.
First Time Buyers, Brexit and Boris Johnson
An influx of deals agreed over the last several months will cause a substantial rise in House prices over the summer – according to new data from property experts Reallymoving and Rightmove.
Fuelled by past frustrations of political indecision, home buyers see the nearing deadline of Brexit as an essential milestone for establishing stability and future prosperity in the market. Investors encouraged by the light at the end of the tunnel now also see an opportunity to capitalise on exceptional value through buying in the last remaining months ahead of Brexit.
House pricing indexes forecast growth of upwards of 1.2% in August, followed by growth of 3.8% in September – marking a crucial turning point in the recovery of what has otherwise been a tough couple of years in the property market. (Reallymoving)
This Summer is also set to see renewed interest and appetite from overseas buyers with the promise of lower stamp duty and purchasing costs for home buyers and investors alike. The introduction of increased Stamp Duty in 2014 was arguably the leading driver in the 20% decline in property prices in areas of Central London in the following year; questions now linger as to whether the introduction of lower Stamp Duty will spark an immediate correction in house values and send prices soaring.
With the prospect of Boris Johnson in No.10 looking more likely than ever, Johnson’s condemnation of high taxation appears to be well received with investors drawn to the Country who have in the past been unmotivated by unattractive costs associated with investment.
“The spring market was more robust than expected and this has prompted positive growth through the summer, particularly for deals agreed in May which are translating to sales in July.”
A plan to cut stamp duty on home purchases in Britain may just be the boost needed by the slumping London property market and give first time buyers the opportunity to get on the property ladder across the UK.
“We have seen a spike in interest in commuter belt locations around the UK’s largest cities, London, Birmingham, Manchester and Newcastle. With high sales in growth location sites such as Gerrards Cross, Luton and Digbeth. There is huge pent-up demand in the UK property market amidst the political unrest if the UK is able to agree a deal with the EU we could see a rush of properties hitting the market in the late autumn along with a surge in buyer demand..”