City focus series:
Liverpool
CITY FOCUS
Contents
_ 04|Moving around the city
_ 05|Sales and lettings markets
_ 06 |The impact of office-to-residential permitted
development rights
_ 07|Moving on up: finding value in a tower
ABOUT COUNTRYWIDE PLC:
Countrywide plc, the UK’s largest integrated property services Group, including the largest estate
agency and lettings network, operates more than 1,300 associated branches across the UK.
Countrywide plc’s network of expertise helps more people move than any other business in the UK
and is a leading provider of estate agency, lettings, mortgage services, land and new homes, auctions,
surveying, conveyancing, corporate property management services and commercial property.
Countrywide plc’s award-winning service has earned the business over 180 high-profile industry awards
in the last six years, with customers voting Countrywide Best Estate and Lettings Agency at the 2014
ESTAS awards. Our Land & New Homes team was named the UK’s Best New Homes Agent for two
consecutive years at the Estate Agency of the Year Awards 2012 and 2013 and Countrywide Surveying
Services has for the third consecutive year won the Best Anti-Fraud Services Award at the Mortgage
Finance Gazette Awards 2015.
www.countrywide.co.uk
3
CITY FOCUS
Liverpool
City focus series
Moving around the city
1
Sales market
50%
40%
Like many large cities, Liverpool holds considerable
draw, particularly to the young. Over half of the
18,000 people who move into Liverpool each year
are aged under 22.
Students
Working age
10%
Aged 65+
2 Moving in
3 Moving out
Average
age:
Average
age:
Average
age:
Average
age:
23
22
28
27
74%
Into rental sector
26%
Into homeownership
35%
65%
Into rental sector
Into homeownership
Where people moving into Liverpool come from:
Where people moving out of Liverpool go to:
1.Sefton
2.London
1.Halton
2.Knowsley
4
3. Cheshire East
4.Bolton
5.Birmingham
3.Warrington
4.Wirral
Southport
Half of people working in Liverpool live outside the city. Here’s where they all come from.
Formby
St.Helens
Widnes
Wirral
Areas where more people work in
Liverpool than work locally
4/5
Liverpool’s reach
Sefton
11.4%
Knowsley
9.3%
Wirral
8.6%
St.Helens
2.4%
Halton
2.1%
Chesire West
1.8%
West Lancs
1.4%
Warrington
1.2%
Manchester
0.7%
Wigan
0.3%
Source: Countrywide plc 2014
www.countrywide.co.uk
equity. With many homeowners
unable to move, it was housebuilders
who drove the market during the
downturn – selling off the tail end of
their development pipelines. With the
market showing signs of recovery
over the last 12 months, a number of
new developments are back under
construction, but many are still 6-12
months away from reaching the
market. The increasing availability
of mortgage products, particularly
those available outside the Help to
Buy scheme, has driven a recovery
in the second hand market. Cash
sales however, were and remain,
an important part of the city centre
market. In 2014, half of all sales
through Countrywide were to cash
buyers. These buyers fall into two
groups: downsizers and investors.
The £200,000+ market is dominated
by downsizers. These are households
selling a mortgage free family home
in the suburbs, to fund the purchase
of a smaller and more manageable
property while releasing some equity.
Investors account for the majority of
cash purchases under £200,000.
These tend to be mid specification
new build blocks in students markets.
Purchases are predominantly yield
driven, with investors prioritising returns over capital growth prospects.
These developments are attractive
to would-be tenants, offering packages such as inclusive utilities, more
flexible tenancy lengths and free
cleaning.The fastest growing segment of the city centre market has
been the student market which now
accounts for 40% of lets. Growth
has come from both an increasing
number of students and the development of a critical mass of purpose
built student accommodation in the
city centre. As a result, areas popular
with students outside the city centre
such as Wavertree, have seen some
properties converted back into family
homes. The student market is highly
seasonal, with 85% of lets agreed
between April and September with 9
or 12 month contracts the norm. For
the most desirable four or five blocks
in prime areas, it is not uncommon for
12 months’ rent to be paid in advance
to secure the property.
Lettings market
The lettings market in the city centre
is characterised by high levels of
tenant mobility and turnover. This
level of churn means that landlords
who can offer property which is ready
to move into (fully furnished with
utility contracts set up) are able to
achieve a premium. 90% of properties in the city centre are offered
furnished, a figure which has grown
in recent years with the construction
of a number of built-to-rent schemes.
5.Sefton
The majority of those moving out of Liverpool choose not to move far, an average of just two and a half miles or a ten-minute
drive, one of the shortest distances in the country. Most of these households continue to work in Liverpool, with half of the
200,000 people working in Liverpool living outside the city itself.
5
2014 marked the beginning of a
pickup in activity among buyers and
sellers in the city centre. In October
there were 40% more registered
buyers alongside a 9% increase in
the number of properties on the market in comparison to the same time
last year. Until 2014, many would-be
sellers had stayed out of the market
with negative equity preventing many
of these households from selling.
Five years of low activity has meant
that 2014 is the first time that many
households have been able to move,
a combination of better access to
mortgage finance and fewer households finding themselves in negative
Newbuild sales as
a proportion of
total transactions
70%
A
65%
60%
55%
B
50%
A
Transactions fall sharply in the
second hand market while
developers sell off the tail end
of pipelines.
B
Whole of market recovery
sees the second hand
stock account for a larger
proportion of sales.
45%
40%
35%
30%
2004200520062007200820092010 2011 2012 2013 2014
CITY FOCUS
Liverpool
City focus series
18 months later: the impact of office-to-residential
permitted development rights
In May 2013 new permitted development rights were
introduced by Central Government which allowed
commercial office space to be converted into residential
accommodation without the need for planning permission. The scheme had the intention of allowing office
space which was surplus to requirements to be converted into residential accommodation quickly. Liverpool
City Council applied for swathes of the city centre to be
excluded from these new permitted development rights,
but was turned down.
18 months after the introduction of office-to-residential
permitted development rights, we take a look at the
impact these new rules are having on Liverpool. While
planning permission itself isn’t required, the time taken
to design and finance a scheme and obtain permitted
development consent, means that it has only been over
the last quarter of 2013 and 2014 that schemes have
started to come forward in any great number. Today
a total of 30 schemes, or 12% of residential units in
the city centre development pipeline, are offices with
permission to be converted into residential accommodation.
The relatively stringent criteria attached to the granting
of permitted development rights meant that only limited
changes are permitted to the fabric of the building. The
need to make changes to the façade, internal layouts
and the provision of amenity space can make schemes
unviable or require a potential development to obtain
full planning permission. Those that have come forward
have fallen into one of two groups.
The first and smaller group, representing around a
quarter of office-to-residential conversions, are destined
for the top end of the private sale market. These are
almost exclusively former houses on the southern fringe
of the city centre. The Hope Street and Canning Quarters are home to the majority of these schemes. These
areas were built for Liverpool’s wealthy merchants in the
early 1880s, but fell out of favour during the 1970s. A
significant number of the larger unlisted Georgian and
Victorian houses were utilised as office space by small
businesses. Selling at £250ft² and above means sufficient margin exists for the costs of re-development to be
covered making the scheme viable.
The second, and largest group of units in the office-to-residential pipeline, comes from purpose built,
6/7
poor quality office space. These schemes perhaps
represent what the Communities Secretary had in mind
when bringing forward permitted development rights.
Liverpool City Council’s fears of losing substantial
amounts of office accommodation haven’t been realised. While a number of schemes have come forward,
viability has proved a stumbling block. Converting office
accommodation achieving over £7ft² in rent annually, the vast majority of the city market, hasn’t proved
viable. The cost of conversion, alongside the short term
private rented sector returns, have proved prohibitive.
While three quarters of the office-to-residential schemes
in the pipeline under the new rules look set to end
up in the student sector, question marks remain over
whether the majority are deliverable or will be realised
any time soon.
Many Local Authorities felt that the introduction of
permitted development rights allowing office space to
be converted into residential accommodation without
the need for planning permission would see the amount
of available office space cut dramatically. In reality the
number of viable schemes are limited as Liverpool City
Council has seen, with only a few suitable uses. With
external alterations not permitted under the rules and
only a degree of internal structural changes allowed,
the suitability of office conversions for the homeownership market remains limited. While in theory the private
rented sector, and the student market in particular, look
to be the largest beneficiaries, large question marks
remain over their viability.
It gives a clear signal to owners,
developers and local planning
authorities that we want underused
and outdated offices to be brought
back to life.
Eric Pickles May 2013
www.countrywide.co.uk
Moving on up
In 1911, the Liver Building was completed on Liverpool’s
waterfront. At 295 feet it was the tallest building in Liverpool and England’s first ‘skyscraper’. The Liver Building
held this honour for 54 years, before being topped by
Liverpool’s famous Radio City tower. Since 2008, the
tallest building in Liverpool is the West Tower (40 floors)
which stands at just over 459 feet.
Finding value in a towerblock:
£/ft2 in Liverpool city centre
Over the last 20 years, new schemes have come in all
shapes and sizes, and the diversity of product on offer
for buyers has never been greater. Even within a single
development, the location of a flat within a block can
have a considerable impact on its value, size and design.
The potential to achieve higher sale prices frequently
leads developers to tailor their product to its position,
even within a single block, resulting in sales to different
types of buyer. The increasing size of flats higher up the
building is a reflection of rising values. Further down the
building, where £/ft² values are lower, smaller flats allow
more units to be accommodated.
The fourth floor represents a dividing line. With the
highest density housing schemes clustered in already
built up areas, flats above the fourth floor tend to tower
above the rooftops, enjoying views of the River Mersey and are able to command the largest premiums.
Between the third and fourth floors, average £/ft² values
jump 15%, the largest increase anywhere within a
scheme, larger than even the differential the penthouse
and the flat on the floor below.
For first time buyers, this value gaps affords the opportunity to buy into a scheme which otherwise may be
unaffordable. For investors, a tenant on the fifth floor
is unlikely to pay 15% more rent than someone on the
floor below. With yields becoming compressed on higher floors, investors tend to target flats on lower levels.
First time buyers, investors and owner occupiers all play
a different role in ensuring that schemes get built. While
investors are willing to purchase units off plan, often
years prior to completion and provide crucial forward
funding, owner occupiers are more willing to pay a
premium for a product they themselves will live in. The
most successful developers in Liverpool have become
apt at designing schemes which cater for all three,
balancing affordability with viability in what has been a
challenging downturn to ensure their scheme gets out
of the ground.
Seventh floor
Sixth floor
Fifth floor
Fourth floor
Third floor
Second floor
First floor
£240ft2
£230ft2
£225ft2
£225ft2
£195ft2
£195ft2
£195ft2
Ground floor
£185ft2
For more information please contact:
Corporate Client Enquiries - 0207 9081562
www.countrywide.co.uk/insight
[email protected]
Find your local Entwistle Green branch:
Allerton
Penketh
20 Allerton Road
Liverpool
L18 1LN
9 Honiton Way
Warrington
WA5 2EY
Tel 01512 680 592
Tel 01925 670 536
Crosby
Runcorn
86 Coronation Road
Liverpool
L23 5RH
28 Church Street
Runcorn
WA7 1LR
Tel 01512 680 593
Tel 01928 529 294
Formby
St Helens
3a Chapel Lane
Liverpool
L37 4DL
11 Hardshaw Street
St. Helens
WA10 1QX
Tel 01704 862 113
Tel 01744 644 016
City Centre
Walton Vale
11 Dale Street
Liverpool
L2 2SH
51 Walton Vale
Liverpool
L9 4RF
Tel 01513 210 192
Tel 01512 680 594
Old Swan
Warrington
11 Old Swan
Liverpool
L13 5SD
Sankey Street
Warrington
WA1 1SL
Tel 01512 680 585
Tel 01925 670 535
Ormskirk
Widnes
Central Square
Liverpool
L31 0AE
49 Albert Road
Widnes
WA8 6JS
Tel 01695 240 114
Tel 01512 680 588