Liverpool leading the way for annual house price growth and affordability

Liverpool has managed a very interesting and appealing double win, according to data from Hometrack.

The city not only topped the list of the UK’s most affordable cities, but has also topped the list of the cities with the highest annual price growth. Putting these two facts together and it’s very easy to see why investors have been flocking to this rejuvenated city.

The presence of students is generally good news for buy-to-let

Student towns such as Liverpool have long had an obvious attraction to buy-to-let investors, but these days astute investors have to be aware that there are significant differences between student towns and the potential returns they offer.

Looking at the UK’s “big six” universities, for example, only two of them have real appeal for investors at this point. Oxford, Cambridge and St Andrews are saturated markets where high property prices and extensive competition place a brake on yield.

Aberdeen’s University does create demand for rental property but overall the housing market is essentially oil driven and it’s very hard to justify buying into it when other markets are offering either better affordability or better returns, or in some cases, like Liverpool, both Edinburgh and Glasgow are both still doing well, but neither is matching Liverpool for either affordability or returns.

London is not exactly a student town, but does certainly contain a large number of students and yet its housing market is currently stagnating. This is not necessarily a deal breaker for long-term investors, but the fact that London house prices remain so high in comparison with other areas makes it very difficult to achieve good rental yields.

Young professionals also tend to be natural renters

Student towns vary in their ability to retain former students in their young adult life and to attract other young adults to their local area. While employment opportunities are one obvious factor in this, the affordability of the area is also important.

Young professionals are, by definition, people who are just starting out in their careers and hence are unlikely to be earning the sorts of salaries which make it comfortable even to rent in the UK’s most expensive locations, such as London and the broader Thames Valley area and that’s even before you factor in the common desire to save for a deposit on their own property.

While London does have the appeal of being the capital and having a wide range of local attractions, the fact is that the north of England can now offer a similar range of lifestyle options, plus its own range of local attractions - all at much more affordable prices.

In the old days, London had a clear edge in terms of employment opportunities but the Northern Powerhouse initiative has already narrowed that gap substantially and the process of regeneration is still continuing. It’s therefore completely understandable that the north of England now has very youthful demographics as it simply has so much to offer young people and, therefore, the businesses and individuals who cater to their needs.

Mark Burns is the managing director of property investment firm Hopwood House.

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