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RESIDENTIAL FORECASTS
NORTHERN
ENGLAND
Northern England’s largest cities are leading the
way in urban living. Manchester is the unofficial
capital of the purpose built private rented sector and
the Northern Powerhouse initiative will continue to
provide a political and economic boost for the region.
The key challenge is to generate enough housing to
meet the significant demand.
UK Research, February 2017
March 2014
Northern England Residential Forecasts
jll.co.uk/residential
jll.co.uk/residential
NORTHERN ENGLAND RESIDENTIAL FORECASTS
OUR VIEW
NORTHERN ENGLAND
Northern England’s main cities are beginning to thrive again. Manchester, the
UK’s second city, is flourishing amid strong housing demand and significant
development activity and is becoming increasingly global. Leeds and Liverpool
are also now looking forward with greater confidence. The region will benefit
further from the Government’s Northern Powerhouse programme.
2
Brexit progress This time around our analysis,
The political and economic outlook judgement and forecasts suggest that
is quite uncertain as a result of the residential property performance
EU referendum vote. Prime Minister will be stronger in city centres than
Theresa May has stated that the UK in traditional housing in out of town
will invoke Article 50 of the Lisbon locations. This derives from a complete
Treaty by the end of March but this is turnaround in the appetite, desire and
likely to be just one of many milestones view towards city centre living. The
along the road to Brexit. JLL RESIDENTIAL, NORTH
strength and pace of change has also
led to the emergence of the Private
STEPHEN HOGG
Rhetoric and sentiment will Rented Community (PRC) institutional
undoubtedly fluctuate en route to our investment model. Progress has been
exit but there have been encouraging activity. Until this new supply is slow but is now gathering momentum.
economic signs since the vote last completed, however, residential Indeed, Manchester is leading this
June. These suggest that UK and demand is significantly outweighing drive with several specialist PRC
regional economies have been more available supply and is creating developments set to be delivered over
resilient, less vulnerable and indeed pressures within both the sales and the next few years.
more positive since the referendum. lettings markets.
Optimistic outlook
However, most economic forecasts are Leeds has a significant amount of pent So city living has returned with gusto
still predicting a shallower economic up demand for city centre residential and we expect city centre residential
growth and employment growth profile property and there has also been markets to outperform suburban
than would otherwise have been the strong demand for development land – and rural counterparts in terms of
case. This said, economic growth a strong sign of confidence in the city. sales price and rental growth over
across Northern England is projected Now is the time for new schemes to the next five years. This trend will
to be 1.5% pa between 2017 and 2021. come forward. undoubtedly draw heightened interest
The highest rate of growth is forecast from developers and housebuilders and
to be in the financial & business Liverpool is a rapidly transforming city we expect competition for land in these
services sector which is expected to with major regeneration activity taking locations to intensify.
expand by 2.4% pa during this time. place, particularly in the docklands.
The city is now firmly at the top of Unfortunately there is an insufficient
Northern Powerhouse many investor’s hit lists and looks set number of suitable sites in the main
Northern England prospects have been to outperform other regional cities in city centres and we expect this to lead
boosted by the Government’s Northern terms of price and rental growth. to an even greater excess of demand
Powerhouse initiative. While the North relative to supply. Northern England
West and Yorkshire and The Humber City centre and PRC evolution as a whole, and particularly the cities
regional economies are set for a more Perhaps the greatest housing market of Liverpool, Leeds and Manchester,
prosperous few years, it will be the changes over the past 10-15 years have a real task on their hands to
employment hubs of Manchester, Leeds have been around city centre living deliver the housing that the growing
and Liverpool that will lead the way. and renting. During the last couple of population needs. New Government
economic downturns it has been city policies will help to some extent, but
The Manchester city centre residential centre residential markets which have we anticipate the UK’s housing market
market has been one of the UK’s proved most vulnerable and susceptible supply issues, which also bring sound
leading markets for price and rental to price corrections. This was largely due property performance, to continue for
growth for several years now, and that to the reliance on the buy-to-let sector in some time to come.
looks set to continue. This has led to a terms of sales and the seemingly fickle
considerable increase in development nature of rental demand.
OUR FORECASTS HOUSE PRICE FORECASTS (% pa) 2017 2018 2019 2020 2021 2017-2021* Manchester 7.0 6.5 3.5 4.0 4.5 28.2 Liverpool 4.5 5.0 3.0 4.0 4.5 22.8 Leeds 2.0 4.0 4.0 4.5 5.5 21.6 UK 0.5 1.0 2.0 4.0 5.0 13.1 RENTAL GROWTH FORECASTS (% pa) 2017 2018 2019 2020 2021 2017-2021* Manchester 3.0 3.5 4.0 4.0 4.5 20.5 Liverpool 2.5 3.0 3.5 3.5 4.0 17.6 Leeds 5.0 5.0 4.0 3.5 3.0 22.2 UK 2.5 3.0 3.5 3.5 4.0 17.6 HOUSE PRICE GROWTH (% pa) 2017 2018 2019 2020 2021 2017-2021* Greater London 1.0 2.0 3.0 5.0 7.0 19.2 South East 1.0 1.5 2.0 4.0 5.5 14.7 Eastern 1.0 1.5 2.5 4.0 5.5 15.3 South West 0.0 0.5 1.5 3.5 4.5 10.3 East Midlands 0.5 1.0 2.0 3.5 5.0 12.5 West Midlands 0.5 1.0 2.0 3.5 5.0 12.5 Yorkshire & Humbs 0.5 1.5 2.0 4.0 5.0 13.6 North West 2.0 2.0 3.0 4.5 5.5 18.1 North East -1.0 0.0 1.0 3.0 4.0 7.1 Wales -1.0 0.5 1.0 3.0 4.0 7.6 Scotland 0.0 1.0 2.0 3.0 4.5 10.9 UK 0.5 1.0 2.0 4.0 5.0 13.1 ACTIVITY AND DEVELOPMENT (000s) 2017 2018 2019 2020 2021 2017-2021* UK transactions 1,080 1,110 1,150 1,200 1,260 1,160 England housing starts 134 134 136 140 146 138 England housing completions 145 140 135 135 136 138 * 2017-2021 cumulative figures
NORTHERN ENGLAND RESIDENTIAL FORECASTS
NORTHERN
POWERHOUSE SUCCESS
The Northern Powerhouse initiative is proving highly successful both on the
ground and in terms of profile. Manchester continues to be the leading light but
the wider region is also benefitting. Although there is still some business sector
rebalancing to conclude, other sectors of the economy are expected to grow
rapidly. The economic outlook for Northern England, and for its key cities in
4
particular, looks bright.
Strong economic growth expected Compared with the rest of Northern Employment growth in Manchester
The expansion of the Northern England, economic growth in and Leeds is expected to increase
England economy over the next Manchester, Leeds and Liverpool is at a rate well above the Northern
five years will be supported by projected to be higher. The economy England average during the 2017-21
significant investment in business and in Manchester is forecast to expand period. The growth in employment
infrastructure. The cities and towns by 2.3% pa between 2017 and 2021 in Manchester is forecast to be 4.5%
within this region form part of the while Leeds is predicted to see 1.9% during the next five years, while the
Government’s Northern Powerhouse pa economic growth over the same number of jobs in Leeds is expected to
strategy which aims to boost economic period. Economic growth in Liverpool rise by 2.2%. Liverpool is predicted to
growth in the region and address is anticipated to be 1.5% pa over the see a 0.8% increase in jobs during the
productivity barriers. next five years. next five years.
As a result, Northern England is set Jobs growth is sector dependent Housing expansion
to benefit from improved connectivity, Boosted by the Northern Powerhouse With a growing population in Northern
investment in science and innovation initiative, additional job opportunities England, the number of households
as well as devolution by way of city will be created in the region over is set to increase by 209,000 over the
deals, helping to ensure the economic the next five years. However, given next five years. This equates to almost
prosperity of the region for future anticipated job losses in some sectors 42,000 new households each year
generations, as well as improving the of the economy, overall employment in across the region.
quality of people’s lives. Northern England is only forecast to
grow by 0.2% or 12,400 jobs during the Many of the new households will be in
Economic growth across the region 2017-21 period. Manchester, Leeds and Liverpool. The
is projected to be 1.5% pa between number of households in Manchester
2017 and 2021. The highest rate of The greatest growth is set to be in the is forecast to grow by 3,300 a year, in
growth is forecast to be in the financial financial and business services sector Leeds 2,200 a year and in Liverpool
& business services sector which is where the number of jobs is expected 2,000 a year over the 2017 to 2021
expected to expand by 2.4% pa during to rise by 72,000, a 4.7% expansion, period.
this time. during the five years to 2021. The
retail and accommodation sector is A major challenge for Northern
Manchester and Leeds in particular also predicted to perform well with England will be how to provide
should benefit from devolution. Greater a projected 22,000 new jobs set to be sufficient levels of housing to
mayoral power should facilitate created, an increase of 1.3%. accommodate the anticipated rise
better decision making as to where in households. Recent construction
funds would most benefit these local The public sector and the levels of around 32,000 homes a year
areas. Additionally, High Speed 3, the manufacturing and utilities sectors is well below the projected increase in
planned route between Manchester in Northern England are, however, household formation of nearly 42,000
and Leeds, as well as other more predicted to see a decline in jobs, as per annum.
immediate transport infrastructure they are across the UK. They are
initiatives, will play a notable role in expected to contract by 2.4% and 7.3%
encouraging economic growth both in respectively during the 2017-21 period.
and between these cities. Overall though, the expansion of the
higher performing sectors in Northern
England is expected to outweigh the
decline in other sectors.GDP GROWTH FORECASTS BY SECTOR, NORTHERN ENGLAND 2017-2021
% change pa 2017-2021
1 Financial & business services +2.4
2 Transport, communications & construction +1.9
3 Retail & accommodation +2.0
4 Manufacturing and utilities +1.0
5 Public sector +0.2
6 Other +0.9
TOTAL +1.5
Source: JLL, Oxford Economics
GDP GROWTH FORECASTS HOUSEHOLD EXPANSION FORECASTS
% change pa, whole economy
2.1% Expected change in number of households pa 2017-2021
1.9%
1.3%
1.2% 41,700
1.0%
3,300
2,200
2,000
2017 2018 2019 2020 2021 NORTHERN ENGLAND MANCHESTER LEEDS LIVERPOOL
Source: JLL, Oxford Economics Source: JLL, Oxford Economics
Northern England combines the regions North East, North West and Yorkshire & The HumberNORTHERN ENGLAND RESIDENTIAL FORECASTS
CITY CENTRE MARKET
MANCHESTER
Manchester city centre is currently one of the hottest residential markets in the
6
UK. Rapid population growth, a lack of new supply, a buoyant local economy
and scores of international investors and UK institutions jostling for position on
key large-scale sites all contributed to 15% average capital value growth in 2016.
JLL forecasts that Manchester will once again be the market to watch in 2017.
Sales market Prime one bed flats now average is reflected by the strength of interest
In the immediate aftermath of the £190,000 with prime two bed flats from both national and international
EU Referendum, housebuilders averaging £325,000. investors and there is currently a
were focused intently on the sales development pipeline in excess of
Rentals market 20,000 units.
performance of their trading outlets to
look for the first signs of any impact The city centre lettings market was
upon consumer confidence and the very buoyant in 2016. Two thirds of However, the vast majority of those
direction of travel for the market. the Manchester city centre population units are at the pre-planning stage
are private renters. New build rental and only around 10% are currently
In a testament to the strength of the demand predominantly comes from under construction. Meanwhile the city
Manchester city centre residential young professionals, new graduates and centre has seen, and continues to see,
market, as the Summer progressed, the city’s 80,000 full-time students. significant population growth creating
developers were all reporting sales a shortfall in delivery currently of more
results that were either unaffected or At the end of 2016 average rents for than 1,000 homes pa.
in most cases, better than the same one and two bedroom flats in the
trading period of last year. city centre were circa £875pcm and Despite there being a large number
£1,100pcm respectively with prime of homes in the planning process
As with the past few years, price rents at £1,100pcm and £1,600pcm. there is likely to be an undersupply in
growth in Manchester city centre Rents increased by 6.9% on average the next 3-5 years due to the strong
has significantly outperformed the during the year following growth of economic performance of the city
regional and national averages due to 8.5% in 2015 as a small amount of the centre continuing to create significant
a critical immediate lack of supply to rental price pressure caused by a lack population growth. There is not likely
meet demand. of supply eased with the delivery of to be any large scale completions until
the first phase of LaSalle Investment 2019, which will continue to fuel strong
Manchester’s city centre population Management’s Greengate scheme. price growth.
has risen fivefold in just 15 years from However, this scheme was 70% let
10,000 in 2000 to more than 50,000 in Some significant new developments
within just 8 weeks highlighting the
2016. The rapid population growth is started on site in 2016 including the
level of pent up rental demand.
expected to continue over the next 10 English Cities Fund’s 750-unit New
years with the city centre expected to Bailey scheme and Moda Living’s
Two thirds of the Manchester city
be home to more than 80,000 people 460-unit Angel Gardens at the heart of
centre population are private renters.
by 2024. the £800m NOMA 20-acre mixed use
While some are renting out of choice
regeneration project.
Average prices of one and two bedroom and convenience there are additionally
flats in the city centre were circa others who are renting because they Schemes are now being delivered at all
£150,000 and £230,000 respectively at cannot yet afford to buy. levels of the market in response to a
the end of 2016, having increased by key demand trend for apartments with
Development market higher specification and for schemes
15% on average during the year.
Manchester city centre is currently with better amenities such as resident
Demand at the prime end of the one of the most significant residential lounges, gyms and concierge.
market continued to strengthen. development markets in the UK. ThisMANCHESTER CITY CENTRE
SALES MARKET RENTAL MARKET
£150k £230k £875 £1,100
pcm pcm
1 bed 2 bed
1 bed 2 bed
AVERAGE AVERAGE
PRIME PRIME
£190k £325k £1,100 £1,600
pcm pcm
1 bed 2 bed
1 bed 2 bed
PRICE GROWTH RENTAL GROWTH
2014 6.3% 2014 10.0%
2015 9.5% 2015 8.5%
2016 15.0% 2016 6.9%
Source: JLLNORTHERN ENGLAND RESIDENTIAL FORECASTS
LAND MARKET & OUTLOOK
MANCHESTER
8
Land market Furthermore, the market is also There remains a significant and
During the uncertain period in benefiting from an improvement in growing interest from institutional
the run up to the EU Referendum, development activity from affordable investors in the city’s PRC market with
commitment to land transactions was housing providers who are increasingly the majority of large scale investors
understandably unsettled. However, becoming active in land acquisition. looking to build a portfolio including at
normal land buying activity resumed Often, this is to deliver speculative least one Manchester scheme.
as the Autumn progressed mirroring open market product in order to
the underlying strength and resilience generate profits to supplant declining This is reflected by the fact that there
of new homes sales in the city centre. government funding support. are more than 20 proposed PRC
schemes in Manchester city centre
Land sales in strong market areas This sector of the market is expected totalling circa 9,000 units.
with limited competing supply to continue to play a more prominent
concluded as originally agreed pre- role in the land market with Outlook
Brexit, but some sales in secondary affordable housing providers bringing Manchester city centre is JLL
areas were delayed with some price competition to large suburban Residential Research’s number one
renegotiation. family housing sites that would have market for capital value growth
traditionally been the preserve of the prospects over the next five years,
There was a modest softening of land listed volume housebuilders. and is expected to be among the best
values in 2016 with developers now performers for rental growth as well.
taking a more conservative view of Private Rented Communities
projected sales growth and sales rates; The first large scale PRC was International interest in the city
and many have marginally increased delivered in Manchester in 2016 – continues to grow year on year.
profit margins as added coverage LaSalle Investment Management’s
should the market toughen as a result 500-unit Greengate scheme. This There will remain a dearth of new
of economic uncertainty. proved to be a great success in terms stock finishing over the next couple of
of take up rates and rents achieved. years and that which does complete
Consequently, the spread of pricing It demonstrated the appetite in is expected to be heavily weighted
on bids has converged with a Manchester for purpose built private towards the private rental market
reduced likelihood of an ‘outlier’ rental accommodation and the benefits creating significant price growth
bid from a developer taking a cut of amenities in terms of take up. pressure for the open sale market.
in margin in order to knock out the
competition. Nonetheless, there is an Tenants have quickly seen the As a result, JLL is forecasting sales
increasing depth to the market with attraction of what a PRC can mean for prices to rise by 7% in 2017 and by an
greater appetite from large private them in terms of service and facilities. average of 5.1% pa over the 2017-2021
housebuilders and SMEs. Let up rates hit 20 units per week at period.
Greengate with many tenants making
the decision to rent after having only We are also predicting strong rental
seen the facilities. growth, with rents expected to increase
by 3% in 2017 and by an average of
3.8% pa over the five years 2017-2021.MANCHESTER HOUSE PRICE FORECASTS
% change pa
2017-2021
28.2%
7% 61/2% 31/2% 4% 41/2%
2017 2018 2019 2020 2021
Source: JLL
MANCHESTER RENTAL GROWTH FORECASTS
% change pa
2017-2021
20.5%
3% 31/2% 4% 4% 41/2%
2017 2018 2019 2020 2021
Source: JLL
“Manchester city centre is severely starved of supply which in turn is pushing price
growth. We have seen increased levels of international investor interest over the
course of 2016 and expect this to continue during 2017 and onwards. Both UK
and international investors are increasingly turning their attention away from the
traditional hotspot of London towards Manchester, buoyed by more favourable
capital and rental growth.”
Louise Emmott
JLL Residential, ManchesterNORTHERN ENGLAND RESIDENTIAL FORECASTS
CITY CENTRE MARKET
LEEDS
Despite uncertainty surrounding Brexit, national and international investor
10
interest in Leeds has been growing. The city centre residential market is
dominated by affluent young professionals, which in turn is attracting significant
investment in the private rental sector. The first Private Rented Communities
are now being delivered which will finally begin to satisfy the rental population’s
desire for a higher value offering in Leeds.
Sales market young professionals and the city’s Development market
The sales market in Leeds remains 50,000 students, particularly overseas Leeds is one of the largest cities in
active and demand for all property students. More than 80% of the city the UK, however its city centre is
sizes is strong. However, a shortage centre population is aged between 15 dominated by commercial property
of high quality apartments remains a and 34. This impacts rental demand and as a residential location it is
significant issue for the market. This as many in this age group have not yet relatively compact with around 5,000
lack of supply has underpinned modest raised the capital for a housing deposit, homes. The city underwent a building
price increases despite the uncertainty while others are renting out of choice boom prior to the global financial
created by the EU Referendum result. in the city centre to take advantage of crisis, but subsequently new housing
its employment and leisure offerings. development ground to a halt. After
There has been a marked increase a long period of relatively low activity
in interest from both national and Over the past five years there has the first signs of new development
international investors for Leeds city been little development to alleviate the occurred in 2016.
centre residential property. Prices in imbalance of excess demand compared
Leeds look low when compared with with supply. Some of that pressure The eagerly awaited new developments
other major UK regional cities such as diminished slightly in 2016 and whilst should stimulate the market, with
Manchester and Birmingham as well rents have continued to increase the first new developments delivered
as smaller local markets such as York steadily, they have not maintained in good locations likely to set new
and Harrogate. the level of growth over previous standards for pricing and rents.
years as the sales market has become
Typical prices of one and two bedroom more accessible and pressure on the One of the notable schemes
flats in the city centre were circa existing rental stock has lessened. This being delivered in 2016 was JM
£120,000 and £180,000 respectively is illustrated by an easing of rental Construction’s Tate House on
at the end of 2016, having increased growth in the city with an average Bridge Street where sales have been
by 4.2% on average during 2016. rise of 1.9% in 2016 compared with a completed on all but three of the 14
Our expectation is that as the rise of 6.4% in 2015 and 7.7% in 2014. penthouses in the 74-unit scheme.
first significant, well located new However, occupancy rates remain
developments in the city are brought high at around 97% and there is still a There is continued strong interest in
forward, the stimulus to the market shortage of high quality stock. development sites, following a run of
will result in an increase in turnover activity in the past 24 months. Schemes
and a price improvement to bring those Typically a one bedroom flat for some of these sites are currently
schemes more in line with comparable commands an average rent of £650 being prepared, while others have been
regional city centres. pcm, while two bedroom flats rent put on hold temporarily until the fallout
for an average of circa £895. Prime from Brexit becomes clearer.
Rentals market one bed flats rent for an average of
The lettings market in Leeds remains £850pcm while prime two bed flats Somewhat at odds with other city
strong for all types of accommodation. rent for £1,200pcm. Car parks achieve centre markets, car parking is deemed
Private rental properties account for rents of circa £100pcm to £150pcm. to be important to achieve the highest
circa 75% of all city centre residential rents and sales values in Leeds.
units. Demand is predominantly fromLEEDS CITY CENTRE
SALES MARKET RENTAL MARKET
£120k £180k £650 £895
pcm pcm
1 bed 2 bed
1 bed 2 bed
AVERAGE AVERAGE
PRIME PRIME
£160k £242k £850 £1,200
pcm pcm
1 bed 2 bed
1 bed 2 bed
PRICE GROWTH RENTAL GROWTH
2014 5.1% 2014 7.7%
2015 6.8% 2015 6.4%
2016 4.2% 2016 1.9%
Source: JLLNORTHERN ENGLAND RESIDENTIAL FORECASTS
LAND MARKET & OUTLOOK
12
LEEDS
Land market looking to more secondary locations to Caddick Developments and Moda
Demand for residential development balance their portfolios. Living have two schemes at Quarry
land in Leeds city centre is high and Hill and City One, totalling circa
has increased dramatically over the Private Rented Communities 2,000 units for which options are being
past 12-18 months. Following several PRCs could dominate the Leeds explored for either PRC use or open
years of inactivity, a number of sites development market over the next five market sale.
changed hands during 2015 supported years. Of the 19 large proposed Leeds
by an improving economy and brighter residential schemes, either with or Outlook
housing market conditions. without planning permission, 12 are The outlook for the Leeds city centre
expected to be developed as PRCs. residential market is good. There
In 2016, although the demand for is a strong local economy and an
sites in good locations has increased, However, there is currently a lack of affluent workforce with two thirds of
the availability of high quality completed stock, leaving investors to households in the city centre earning
opportunities has meant that land explore forward funding options in in excess of £50,000pa. There is
transactions are limited to a handful order to secure sites in Leeds. also a pipeline of 12 consented new
of sites, slightly removed from the developments which total more than
city centre. These include a combined In Q3 2016 Grainger forward 5,000 units that are expected to start
six acres at the former First Bus and purchased the former Yorkshire Post on site in the next 12-24 months.
Scientific Games sites adjacent to site for £40m from YP Real Estate.
the former Yorkshire Chemicals site The scheme will now be developed This much needed new supply will
on Kirkstall Road, where planning as a 242-unit PRC including 3,600 undoubtedly stoke the market
permission exists for over 1,000 sq ft of amenities and a 3,300 sq ft creating churn and raising prices for
apartments and student beds. It commercial unit. the better schemes.
is anticipated that these sites will
be brought forward to provide a Several other PRC developments are The introduction of PRC developments
mix of uses including a significant expected to start on site in late 2017 or will also enhance the city’s rental
residential element. early 2018. offering. Rents within these
developments may be slightly higher
Purchasers have been seeking These include Monk Bridge, where than the existing stock, but the city
opportunities to deliver schemes for Foundation Real Estate are proposing centre rental market is dominated
both open market sale and private circa 300 PRC units as well 300 units by young professionals who are
rent, or a mixture of the two. for sale on the open market. increasingly demanding a higher
quality of rental product including
Outside the city centre, confidence Negotiations, are understood to have amenities and enhanced facilities.
is strong and housebuilders are still progressed on Taylor Wimpey’s former
highly acquisitive. Having focussed on Green Bank site on Globe Road, which
sites in prime locations over the last has an historic planning consent for
few years, some housebuilders are now 600 units.LEEDS HOUSE PRICE FORECASTS
% change pa
2017-2021
21.6%
2% 4% 4% 41/2% 51/2%
2017 2018 2019 2020 2021
Source: JLL
LEEDS RENTAL GROWTH FORECASTS
% change pa
2017-2021
22.2%
5% 5% 4% 31/2% 3%
2017 2018 2019 2020 2021
Source: JLL
“Leeds is in a unique position - it has a strong economy, an unmatched retail and
leisure offering, pent up demand for new housing to buy and rent and a shortfall of
7,500 homes per annum. There is strong demand for development land - a sign of
confidence in the city. We now need new schemes to come forward - it would be a
shame to look back at the end of 2017 and see such a great opportunity missed.”
Charles Calvert
JLL Residential, LeedsNORTHERN ENGLAND RESIDENTIAL FORECASTS
CITY CENTRE MARKET
LIVERPOOL
Liverpool is a city on the rise. Major national and international investors are
14
beginning to buy into the growth story which is seeing game changing
regeneration schemes along the docklands waterfront and in the new
Knowledge Quarter. The first PRC schemes are now also coming on stream for
the city’s growing army of young professional and graduate renters.
Sales market half of all people living in the city On the whole, activity in the
The last 18-24 months has seen a centre are young professionals. Many development market has been relatively
welcome sign of confidence in the of these people have recently entered scarce in the years since the Global
Liverpool city centre sales market employment, but are yet to commit Financial Crisis. However, the past 12
through the re-emergence of owner to a permanent future in Liverpool. months has seen some much needed
occupiers following a period of time However, they are increasingly activity in terms of construction starts
when transactions were dominated demanding a higher quality of and new planning permissions.
by investors. Demand from owner rental offering. Contemporary
occupiers is focussed on established furnished properties in a waterside The most significant scheme by some
areas in the city centre and the setting which offer a high quality margin is Peel Group’s £5.5bn Liverpool
waterfront. management service command the Waters which will see the regeneration
highest rents in Liverpool. of a 150-acre historic dockland site into
Owner occupiers account for around a major new waterfront quarter over the
one fifth of all the private residential Demand for rental property also next 30 years.
homes in the city centre. A sizeable comes from Liverpool’s 50,000 under-
proportion of owner occupiers are graduate students and 10,000 post- The project includes 9,000 residential
downsizers who have been attracted graduates, who together account for units, 1,400 hotel beds, 3.4m sq ft of
to river-facing schemes offering circa 15% of the city’s total population. office space and a substantial retail and
full management and maintenance leisure offering spread across 2km of the
services as well as a concierge. Akin As of the end of 2016, an average banks of the River Mersey. Some 800 of
to trends seen across other major UK one bed flat commanded a rent of the residential units are now on site.
cities they have also been attracted £695pcm, while prime one bed flats
to live in the centre in order to be averaged £850pcm. Two bed flats Residential neighbourhoods will range
in closer proximity to Liverpool’s averaged £900pcm with prime two from tall building clusters at Princes
significant retail and leisure offering. bed flats averaging £1,200pcm. Rental Dock and Central Docks to low to mid-
prices increased by an average of rise neighbourhoods at Clarence and
Typical prices of one and two bedroom 10.3% in 2016. Northern Docks.
flats in the city centre were circa
£120,000 and £195,000 respectively at Development market Other notable schemes to have recently
the end of 2016, having increased by Since 2009, new development in the received planning permission include
6.7% on average during 2016. Prime one city centre has been focussed on the 21 The Strand, a prime site with a
bed flats averaged £145,000 with prime rental market, albeit on a buy-to-let proposal for a 383 high end apartment
two bed flats averaging £235,000. basis, as opposed to single ownership scheme overlooking Canning Dock.
Private Rented Communities. The
Rentals market majority of schemes have been studio-
Two thirds of homes in Liverpool city led and forward funded via individual
centre are privately rented. Rental overseas investors purchasing subject
demand is dominated by young to a rent guarantee.
professionals and graduates from
Liverpool’s three universities. AroundLIVERPOOL CITY CENTRE
SALES MARKET RENTAL MARKET
£120k £195k £695 £900
pcm pcm
1 bed 2 bed
1 bed 2 bed
AVERAGE AVERAGE
PRIME PRIME
£145k £235k £850 £1,200
pcm pcm
1 bed 2 bed
1 bed 2 bed
PRICE GROWTH RENTAL GROWTH
2014 4.0% 2014 7.9%
2015 13.5% 2015 7.3%
2016 6.7% 2016 10.3%
Source: JLLNORTHERN ENGLAND RESIDENTIAL FORECASTS
LAND MARKET & OUTLOOK
16
LIVERPOOL
Land market Liverpool is fast emerging as a ‘must The Liverpool One shopping centre and
There is little by way of recent have’ addition to institutional investors’ the 11,000-seater Echo Arena, both
comparable land sales evidence in the growing portfolios of PRC units. completed in 2008 have helped cement
Liverpool market with a lot of land Liverpool’s world renowned retail and
traded off-market. As such it can be In Q4 2016 Moda Living and Apache leisure offering.
difficult to place land values. Most Capital Partners received planning
purchasers in the city centre market permission for a 34-storey £82m PRC The Peel Group’s £5.5bn Liverpool
are paying circa £18,500 to £20,000 tower called the Lexington. Waters coupled with its sister scheme
per plot for land. Wirral Waters on the opposite bank of
The scheme, which will be among the Mersey will radically transform a
Local buyers have dominated the land the tallest in the Liverpool Waters long stretch of the city’s once celebrated
market in Liverpool for many years neighbourhood, includes 304 one, docklands.
with national developers struggling to two and three bed units along with
gain a foothold. amenity space. Plans were also unveiled in Q4
2016 for a £2bn 450-acre Knowledge
However, national and international The project adds to Moda and Apache’s Quarter, which over the next five
investors are looking ever more closely growing portfolio which includes years will aim to turn Liverpool into
at Liverpool due to a combination schemes in Manchester, Birmingham a world-class destination for science,
of the current strength of the local and Glasgow. innovation, education, technology and
economy, scale of major city centre the creative and performing arts.
investment, and the relatively more Outlook
affordable residential market compared Liverpool is a rapidly transforming city Work is expected to begin in 2017 on
with other major UK regional cities. with major regeneration activity taking the £1bn Paddington Village within
place, particularly in the docklands. the Knowledge Quarter which will see
Private Rented Communities The city is now firmly at the top of the creation of a 1.8m sq ft scheme of
One of the notable factors of the many investor’s hit lists and looks set international significance specialising
market in the last couple of years to outperform other regional cities in in life and medical sciences as well as
has been a shift in emphasis from terms of price and rental growth. including hotel and residential space.
developers seeking individual
apartment sales to developers seeing There are many reasons to be
bulk sales to investment funds, who optimistic about the Liverpool city
will provide funding. centre residential market. Major
investment has occurred and will
This is partly due to difficulty in continue to pour into the city, which
obtaining finance, but also an increased will ultimately boost demand for
appetite from pension funds and other housing.
institutional grade investors actively
looking at securing PRC assets.LIVERPOOL HOUSE PRICE FORECASTS
% change pa
2017-2021
22.8%
41/2% 5% 3% 4% 41/2%
2017 2018 2019 2020 2021
Source: JLL
LIVERPOOL RENTAL GROWTH FORECASTS
% change pa
2017-2021
17.6%
21/2% 3% 31/2% 31/2% 4%
2017 2018 2019 2020 2021
Source: JLL
“Liverpool is a rapidly transforming city with huge amounts of regeneration activity
taking place. The city continues to outperform other regional cities in terms of rental
and capital growth and is now firmly at the top of many investor’s hit lists.”
Robert Hogarth
JLL Residential, North WestNORTHERN ENGLAND RESIDENTIAL FORECASTS
BREXIT OUTCOME KEY TO
UK ECONOMIC FUTURE
The economic and political landscape for the next five years will
be particularly uncertain. The outlook is highly dependent on the
negotiations, ongoing rhetoric and the final Brexit deals agreed but
output growth is expected to remain positive throughout and to return
18
to trend within five years even if a hard Brexit is the ultimate decision.
2016 Brexit influence 2017 reasonably robust GDP growth is expected to rise from
The vote to leave the EU has Brexit uncertainty will continue to 1.5% pa in 2018 towards a very
heightened both political and economic be the overriding characteristic in respectable 2.3% pa by 2021. The bank
risks for the UK. 2017. Rhetoric emanating from Brexit rate is only anticipated to be increased
negotiations, including the invoking of marginally in order to maintain
The UK economy is expected to have Article 50 in Q1, is likely to mean quite economic expansion momentum. Even
slowed in 2016 with business investment a turbulent time in terms of business by the end of 2021 the bank rate is only
falling. This said, post-Brexit surveys and consumer confidence. forecast to be 1.5%.
suggest that the economic slowdown has
not been as harsh as many had feared, This will mean lower business The jobs market should have returned
while averting a recession now looks investment, postponed capital spending to today’s levels by 2021 while
highly likely. and deferred employment plans. earnings growth is forecast to be as
Overall business investment is forecast buoyant as 4.3% pa. Even exchange
The Bank of England reacted swiftly to fall by 1.0% in 2017 following a rates are predicted to have recovered
and decisively. It cut the bank rate similar decline in 2016. some post-Brexit lost ground with the
to just 0.25% in August from its pound pushing above $1.30.
previous historic low of 0.5%, as well Consumer spending growth is
as announcing other Quantitative expected to ease as the supports of Forecast risks
Easing measures, in a move intended very low inflation and a strong jobs The forthcoming five year UK
to bolster the economy. market both subside. economic outlook is particularly
uncertain. Clearly much depends on
Regardless, the economy will continue There will be a shallow rise in the nature and detail of our EU exit.
to be affected by the referendum. unemployment, further dampening Our base economic forecast assumes
GDP growth, which had increased to household spending power. UK a hard Brexit with access to the
an estimated 2.0% pa by Q4 2016 is unemployment is predicted to rise single market sacrificed in favour of
forecast to slow in 2017. An easing in from 4.9% of the workforce in 2016 to immigration controls.
consumer and business confidence and 5.2% in 2017.
uncertainty about the future are the Despite this, the economic prognosis is
principal drivers of slower growth. Overall GDP growth is predicted to not too detrimental for the UK. There
slow to 1.2% pa by Q4 2017. is clearly downside risk to this quite
The Brexit vote had an immediate benign outlook, if trade agreements
impact on exchange rates with the Medium-term 2018-2021 and financial-sector passporting rights
pound notably weaker relative to all Despite some form of hard Brexit, the are not favourable.
currencies. This has also led to a UK economy is expected to regain
rise in imported inflation with CPI some forward momentum after 2017. However, this base assumption also
inflation nudging up from its low of The Brexit roadmap is likely to be a implies that there is significant upside
-0.1% pa in 2015 and is expected to be little clearer instilling a greater degree potential too.
as high as 1.6% pa by the end of 2016. of certainty and confidence for both
businesses and consumers.UK ECONOMIC FORECASTS
GDP BANK EXCHANGE EARNINGS UNEMPLOYMENT
GROWTH RATE RATE GROWTH RATE
% pa % £/$ % pa %
2014 3.5% 0.5% $1.56 4.0% 5.7%
2015 1.7% 0.5% $1.48 3.0% 5.1%
2016 2.0% 0.25% $1.23 3.2% 4.9%
2017 1.2% 0.25% $1.26 3.2% 5.2%
2018 1.5% 0.25% $1.25 3.3% 5.2%
2019 1.7% 0.5% $1.27 3.4% 5.2%
2020 2.2% 1.0% $1.31 4.0% 5.2%
2021 2.3% 1.5% $1.34 4.3% 5.1%
Source: JLL, Oxford EconomicsNORTHERN ENGLAND RESIDENTIAL FORECASTS
UK HOUSING MARKET
FORECASTS
The path towards Brexit will dictate what happens in the UK housing market.
However, although we expect some turbulence, we believe the housing
market will remain reasonably strong and active. Demand will be undermined
in the short-term by uncertainty and a more subdued economy while supply
20
issues will exacerbate, lending support to prices.
2017 2018 2019-2021
The UK housing market was returning Brexit negotiations will be ongoing The UK will formally leave the EU
to a more normal and healthy state during 2018 but the principles of our during this time. Our exit route should
prior to the referendum. Although departure should become clearer. already have been clearly defined before
UK house price growth was a little While the hard exit may not be the best exit, with economic sentiment becoming
too high, at 8-10% pa, UK transaction outcome for all, the key here is that there more optimistic and the economy
levels had pushed above 1.2m pa and will be greater certainty. This will create already on a slight upward trajectory.
new housing starts in England had a stronger base and a more optimistic
escalated to 144,000 homes pa. outlook whatever the terms of our exit. Businesses and households will
be feeling more confident and certain,
However, the referendum vote has Companies will be able to plan for the although economic conditions will be
created uncertainty for businesses, future, investing in their businesses and sound and positive rather than exuberant.
households and housebuilders. Early staff once again while households will
indications since the vote suggest a also be more certain of what the future Many people will now be feeling that
mild slowdown in housing transactions holds. The economy will start to expand they should get onto the housing ladder
and marginal easing in house price more strongly again, albeit slowly and before the next wave of strong upward
growth but nothing more sinister. cautiously at first. Employment levels will price movement and this will create
begin to pick up along with wage growth. some urgency, albeit from a reasonably
Importantly, the market slowdown is
benign starting point.
being caused by an easing in economic This will lead to slightly higher housing
growth predicated by an uncertain transaction levels as households feel
outlook rather than by a fundamental more confident about buying their first Others will be feeling more confident
lending and global crisis as we home or moving up the housing ladder. about moving up the housing ladder
experienced in 2008. There will also be increased turnover as while investors are also likely to be
more people move through job changes. more active given the more positive
This is important as there is not a housing market prospects.
sound underlying reason why house Housing construction starts are likely
prices should decline notably. There to be very low in 2018 while completions Improved confidence will also be aided
will not be widespread job losses or will still be slowing from greater by a supportive mortgage market and
household financial problems. activity in previous years. low interest rates.
However, we still predict a circa 11% Despite this, with demand accelerating Transaction levels and house prices
fall in transactions in 2017. and new supply low, there is likely to should begin to rise more strongly
be increased pressure on prices. This in 2020, as everyone settles into life
We expect prices will be broadly flat will begin in quite muted fashion before post-Brexit.
during 2017 as the number of buyers intensifying in future years.
diminishes slightly and their urgency
Rental growth should also accelerate
to buy and to pay top dollar subsides. The UK lettings market will again feel
during this period, rising to around 4%
However, we still expect demand to more stable with the need and desire to
pa by 2021.
be robust with some buyers taking remain flexible a key consideration for
advantage of more subdued conditions. occupants. Rental growth is forecast to
rise by 3% in 2018.
Although housing completions will
be rising during 2017, they will still
fall well short of need leading to some
upward pressure on prices.
The rental market should be stronger
and more active. We expect UK rents to
rise in the order of 2½%.UK HOUSE PRICE GROWTH FORECASTS
% change pa
2008 -14.6%
2012 2.0%
2014 7.8%
1/
2 % 1% 2% 4% 5% 2015 7.8%
2017 2018 2019 2020 2021
2016 7.0%*
Source: JLL, Land Registry *estimate
UK HOUSING TRANSACTION FORECASTS
Number pa
2017 2018 2019 2020 2021
1.08m 1.11m 1.15m 1.20m 1.26m 2006 1.67m
2009 0.86m
2014 1.22m
2015 1.23m
2016 1.22m*
Source: JLL, HMRC *estimate
UK RENTAL GROWTH FORECASTS
% change pa 2012 2.6%
2013 1.7%
2014 1.7%
21/2% 3% 31/2% 31/2% 4% 2015 2.5%
2017 2018 2019 2020 2021
2016 2.2%*
Source: JLL, ONS *estimateNORTHERN ENGLAND RESIDENTIAL FORECASTS
HOUSING SUPPLY
OUTLOOK
The most concerning housing market impact from Brexit will be the
detrimental impact on housing supply. Policymakers are reacting, but the
big question is whether market forces or inducements from government
22 will win the battle of the building site. We suspect market forces will
win round 1 and that the best policymakers can realistically hope for is
increased housing delivery in round 2.
Recovering supply Government action It could be argued that the waters
The national housing supply picture The housebuilding slowdown will muddy further. Not only will UK
has improved significantly in recent will nevertheless come as a huge housebuilders have to contend with
years. The extent of the recovery disappointment for policymakers the fallout from the EU referendum
following the global financial crisis has who have been trying to tackle the but they will also have to weigh up
been remarkable with the number of national housing supply crisis and have the potential impact of government
housing starts rising from just 86,000 been buoyed to some extent by rising initiatives. If, for example, they
in 2009 to 146,000 units in 2015 – a numbers in recent years. believe these will lead to increased
68% increase. development, how should they react?
The Government has made various This is especially difficult during the
However, this figure is still announcements and floated a number of embryonic stages of new policies.
significantly shy of the 184,000 starts ideas and targets. These include Starter
we saw in 2007 and well below need – Homes, a £3bn Home Building Fund Government initiatives will
the most recent estimate coming from and an initiative to build on public
the House of Lords Economic Affairs land. These also come on the back of
have to be so financially
Committee at 300,000 homes pa. the successful Help to Buy schemes. attractive so as to compel
The Government is also due to launch a development. They will have
Brexit slowdown inevitable housing white paper imminently. to enforce development
Although there are no post-Brexit
national housebuilding statistics yet, A fuller discussion on supply initiatives within a tight timeframe
we are expecting the number of new is provided later in this report, but and will have to be large
starts to slow during both Q3 and Q4 whilst these latest announcements enough in scale and volume
this year in response to the EU vote. are encouraging and welcome, the big
to counteract the inevitable
question is whether they will be able to
Housebuilders will quite naturally have any quick or material impact in slowdown in development
be more cautious as the outlook for boosting supply. on private land.
households and housing demand has
become more uncertain. Fundamentally Ultimately housebuilders will only build
development risk has increased. if it makes financial sense for them to
do so and if the risks are manageable.
If development on public
Many developments will still go ahead, Given current circumstances it will be land simply displaces what
albeit less urgently in some cases, difficult to entice housebuilders on site would have been built on
but some schemes will get postponed. in greater volumes. private land then nothing
Importantly, however, there is not a
lending or financial crisis as we saw in
has been gained.
2008, so the impact of this “confidence”
slowdown is likely to be relatively muted.Realistic hopes Hope for the future? be when perceived risk is lower and
Overall, therefore, we believe that Government initiatives, therefore, housebuilders are more assured that
market forces will win the day in the may be able to have a marginal effect greater supply can be absorbed at
short-term. in preventing too sharp a slide in acceptable sales rates and prices.
housebuilding activity over the next
We think it will be very difficult, if not 2-3 years, but nothing more.
impossible, to manufacture any kind of
increase in development activity in the However, perhaps the best that
current climate. government can achieve, and what they
should really be focussed on attaining,
We therefore expect England housing is to evolve policies and initiatives
starts to slip to just 134,000 in both 2017 which will bear fruit when the
and 2018, down from 146,000 in 2015. economy improves and greater housing
market confidence returns. This will
ENGLAND HOUSING STARTS
Number pa
2007 184k
2012 101k
146k 2014 141k
136k 140k
2015 146k
134k 134k
2016 140k*
2017 2018 2019 2020 2021
Source: JLL, DCLG *estimate
ENGLAND HOUSING COMPLETIONS
Number pa
2007 177k
2012 116k
2013 109k
145k
140k 2014 118k
135k 135k 136k 2015 143k
2016 141k*
2017 2018 2019 2020 2021
Source: JLL, DCLG *estimateTHE FINAL WORD
“Theresa May was quick to rubber stamp the UK Government’s commitment to
the Northern Powerhouse initiative after she succeeded David Cameron as Prime
Minister following the EU Referendum. Manchester sits at the heart of the Northern
Powerhouse, a brand that is gathering real momentum.
The Manchester city centre population has grown five-fold in just 15 years driven by
an influx of young professionals attracted by the city’s employment and cultural hubs.
The residential market is the strongest in the UK in terms of price and rental growth,
and that trend looks set to continue, as reflected in JLL’s forecasts.
Manchester is also considered to be the unofficial UK capital of the emerging Private
Rented Community sector, such is the sheer weight of institutional investor interest in
the city.
Meanwhile the two other shining lights of the Northern England economy, Leeds
and Liverpool, can be found a short drive to the East and West along the M62. Both
Leeds and Liverpool, have also seen strong growth in their city centre economies and
residential markets, making them firmly near the top of investor’s hit-lists.
All in all, despite the well documented national and international geo-political unrest
in 2016, the past 12 months proved to be incredibly positive for the residential sector
in Manchester, Liverpool and Leeds. Our expectation is for that to continue in 2017.”
Nick Whitten
JLL Residential Research
Jones Lang LaSalle Property Consultants Pte Ltd
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Singapore 048619
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Intl.Sales@ap.jll.com
www.jllresidential.com/sg/ips
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