rental market snapshot - surrenden invest...rental apartments garner higher incomes than houses,...

RENTAL MARKET SNAPSHOT

W H I T E P A P E R 2 0 1 9

CONTENTS

The UK rental market – an overview 3

Rental market snapshot 4

Changing demands 5

Exciting expectations 6

Birmingham rental market snapshot 7

Manchester rental market snapshot 8

London rental market snapshot 9

Liverpool rental market snapshot 10

Newcastle rental market snapshot 11

City comparison 12

Get in touch 13

www.surrendeninvest.com

The UK rental market is characterised by strong, sustained demand. For years the

country has been building homes at a slower rate than is required to house its growing

population. At the same time, more and more people are renting their homes privately,

rather than owning. This has led to demand for rental homes increasing, particularly in

central urban areas, as a renewed period of urbanisation takes place. This, naturally, has

had a knock-on effect on rents.

THE UK RENTAL MARKET AN OVERVIEW


Ancoats Gardens, Manchester

Between 2005 and 2016, the UK population increased by five million people. In the decade to 2026, the Office for National Statistics (ONS) projects that it will increase by a further 3.6 million. The house building industry is lagging further behind each year, leading to a sustained housing shortfall.

In terms of changing tenure, the private rented sector accounted for 20% of English households in 2016/17. It has doubled in proportional terms since 1996/97, going from 2.1 million households renting privately back then to 4.7 million in the latest English Housing Survey. This has combined with a lack of new housing stock coming online fast enough to create strong demand for rental properties.

In 2017/18, developers delivered just over 222,000 new

homes, against a government target of 300,000. That

included 195,290 newly built homes (with the remainder

being made up of conversions and changes of use

from other types of property). The missed target is

representative of the past decade or more, with the UK

consistently failing to build homes at the pace required.



+5million

4.7million

220,000

UK population increased by five milion people between 2005-2016

Latest number of UK households renting privately according to English Houisng Survey

Developers delivered 220,000 new homes against a government target of 300,000 in 2017/18

Hadrian’s Tower, Newcastle

At the same time, the types of properties that

renters are seeking are changing. Renting used to

be a stepping stone between leaving the parental

home and purchasing a home of your own. Now, it’s

increasingly common for renters to spend years, if

not decades, in rented accommodation, placing yet

more demand on the available stock.

Those who know they will be renting for some

time have different demands from those who

were happy with more of a stop gap solution.

Quite simply, modern renters want more – better

locations, more spacious or luxurious homes and

superb on-site facilities, for a start. What’s more,

they are prepared to pay the additional premiums

that such amenities command.

Central locations are now top of many renters’

list of demands. According to Statista, 83.14% of

the UK’s population lived in cities in 2017, with

the figure having risen steadily from 80.48% just a

decade previously.

CHANGING DEMANDS


These trends of undersupply, rental sector growth and urbanisation led to rents rising

by 1.0% nationally in 2018 and the CBRE 2019 UK Real Estate Market Outlook predicts

further rents over the coming years with a compound growth of 11.4% between 2019 and

2023, as demand for rental homes increases.

UK RENT FORECAST, 2019 TO 2023, %, ANNUAL & CUMULATIVE

1.3%1.9%

2.5% 2.7% 2.6%

11.4%

EXCITING EXPECTATIONS

With city rental markets expanding so rapidly and creating some exciting property investment opportunities as a result, we’ve analysed five of the country’s key urban areas, to look at how they’re performing. Welcome to the 2019 Surrenden Invest Rental Market Snapshot!

12%

11%

10%

9%

8%

7%

6%

5%

4%

3%

2%

1%

0%

2019 2020 2021 2022 2023 2019-2023 (compound)


BIRMINGHAM

Birmingham, England’s ‘second city,’ is a thriving metropolis with a busy rental market. It is the destination of choice for those migrating out of London, as well as for many of those in the West Midlands who are seeking economic good fortune. With a 65,000-strong student population, the city experiences rental property demand at every level, from academics to professionals and their families.


“The age breakdown of those arriving from London is also significant, indicating that, while a large number of those of student age are attracted to the city due to its high quality universities, a significant number of movers are also young workers and families.” Knight Frank

The city has a thriving economy, with one of the largest business concentrations in the country. The finance, insurance, health, education and defence sectors make up the lion’s share of the economy, as well as a dynamic digital/tech scene and a strong tourism sector. All of these draw young people to the city and help to bolster its booming rental market.

BIRMINGHAM IN NUMBERSWhen it comes to rental market values, the average Birmingham property commands £810 pcm (as at April 2019, according to Zoopla). Rental apartments garner higher incomes than houses, reflecting the fact that tenants are prepared to pay more for homes in key city centre locations. Areas like Digbeth, for example, are at the heart of the action, with residents able to enjoy an exciting urban lifestyle that sees them benefitting from the energy and creativity that this part of the city exudes.

From a landlord’s perspective, Birmingham is an excellent prospect. According to Direct Line for Business, Birmingham has the lowest tenant turnover of any English city, with the average renter staying in their home for two years and four months. It also has the lowest void period, at just 11 days, compared to a national average of 22 days. Both of these factors make a significant difference when it comes to how much investors can earn from a rental property.

65,000

2YEARS+

£810pcm

30.21%

Birmingham is home to five universities and 65,000 students

Average renter staying for two years and four months according to Direct Line for Business

The average property rental value in Birmingham according to Zoopla

Property values up by 2.19% over past 12 months and by 30.21% over past five years

B I R M I N G H A M


MANCHESTEROver the last four years, the cost of renting a home in Manchester has shot up by a staggering 30%. In the year from October 2017 to September 2018 alone, rents in the city rose by 7% compared to the same period in 2016/17. Despite the increase, the North West region remains the second cheapest place in the UK in which to rent a home privately.


“Manchester, Bury and Salford have seen the biggest rent rises over the past few years with the average rents for all types of property in Manchester increasing by a staggering 30 per cent since 2013-14 and seven per cent on last year.” Manchester Evening News

Part of Manchester’s appeal to renters is its exceptional business environment. A 2018 report by UHY Hacker Young revealed that the city creates 79 new businesses per 10,000 population – 50% higher than the national average. In recent years, a number of high-profile office openings and relocations to Manchester (the BBC, Google, Amazon and Microsoft among them) have highlighted the city’s ideal mix of low-cost premises and superb urban lifestyle.

The media hub of Salford, with its emphasis on all things creative, the trendy cultural zone that is Ancoats and the bustling central business district offer an incredible array of employment and entrepreneurial opportunities to the city’s professionals. Manchester also has a large student population, ensuring that future generations continue to feed into the city’s economic success.

MANCHESTER IN NUMBERSApril 2019 Zoopla data reveals an average asking rent of £1,258 in Manchester, with apartments commanding notably higher rents than houses with comparable numbers of bedrooms. Manchester’s population is projected to grow by 14.1% between 2018 and 2041, according to the ONS’s subnational population projections and the resulting increase in demand for rental accommodation in the city sets the scene for further rent rises over the years ahead.

The average tenancy in Manchester lasts for one year and four months, according to research by Direct Line for Business, with the average void period standing at 29 days. Interestingly, Manchester has a lower rate of tenants vacating their property before their tenancy is up than the UK as a whole, at 7% and 9% respectively, which is excellent news for those who own rented accommodation in the city.


+30%

1YEAR+

£1,258pcm

+50%

Manchester rental cost rise over the last four years

Average renter staying for one years and four months according to Direct Line for Business

The average property rental value in Manchester according to Zoopla

79 new businesses per 10,000 population, 50% above national average

M A N C H E S T E R

LONDON

The UK’s capital city, London is a hotbed of rental activity. According to the most recent census, 36.7% of London’s population is foreign-born, as the city draws in talented young people from around the world due to its outstanding economic opportunities and cultural attractions. London’s financial services sector is renowned throughout the world, as are the city’s myriad tourist attractions, which together attract around 19 million visitors to the city per year.


London also has outstanding academic credentials, with institutions such as Imperial College London, University College London, King’s College London and the London School of Economics and Political Science attracting the brightest young minds from around the world. Many of these young people then stay in the city once they graduate, providing London with a fresh, dynamic talent pool that feeds into its thriving economy.

SPECIAL MENTION LONDON COMMUTER BELTLondon is such an expensive city to buy and rent in that a vast ‘commuter belt’ has grown around the city. This area continues to expand as the capital’s transport connections grow and improve, such as with the addition of the new Elizabeth Line, which opens over the course of 2019. This means that renters have additional options available to them, with affordable private rented sector housing in commuter belt areas meaning that they can live in larger homes than they would otherwise be able to afford, while still enjoying journey times of under 30 minutes to central areas.

LONDON IN NUMBERSJust 47% of Londoners own their homes, so demand for rental accommodation across the city is huge. Unsurprisingly, therefore, the average void period is below the national average, at just 20 days (versus the UK-wide average of 22 days). London’s renters also tend to stay in their homes for a little longer than the national average, with average tenancy lengths of one year and nine months and one year and six months respectively.

Being such a vast city, London has a huge range of prices when it comes to rented accommodation. Considered as a whole, based on Zoopla’s April 2019 data, the city’s average asking rent stands at £3,166 pcm. Apartments of all sizes command higher rents than comparable houses, with the average one-bedroom apartment having an asking rent of £1,800 pcm and the average two-bed standing at £2,740 pcm.

With notoriously high house prices, London is a city with a private rented sector that is going from strength to strength. Prime central London saw rent growth of 1.1% during 2018 – higher than the national average of 1.0%, according to the ONS. And with strong demand for rental homes in the city unlikely to taper off any time soon, it is reasonable to expect this trend to continue during 2019.


19million

1YEAR+

£3,166pcm

19 million visitors attracted to the city per year

Average renter staying for one years and six months according to Direct Line for Business

The average property rental value in London according to Zoopla

L O N D O N

“As a result of rising rents and downwards pressure on prices, average gross yields in prime central London have risen to 3.35% in December – the highest since April 2012.” Knight Frank

LIVERPOOLLiverpool is one of the UK’s most popular cities, both as a place to visit and as a place to live. It has a superb cultural and entertainment scene, with deep music industry roots. It also has a thriving business environment, having risen from a glorious past of ship-building and international commerce to establish itself as a renowned centre for technology, medicine and science.


“Liverpool needs between 24,000 and 27,000 houses by 2030. Crucially, we need a better blend of properties, given our inheritance of too many older, smaller terraced houses.” Joe Anderson, Mayor of Liverpool

Liverpool’s population grew by 5.5% between the 2001 and 2011 censuses and is projected to grow by a further 12% between 2018 and 2041, according to the ONS. Growth has focused particularly on the city centre, which grew by 181% between 2002 and 2015, during which period it was the fastest-growing city centre in the UK. By 2020, the city centre population is expected to reach 50,000, fuelling demand for private rented accommodation in key central locations.

LIVERPOOL IN NUMBERSLiverpool’s tenants tend to stay a little longer than the national average tenancy length, at one year and seven months (versus the national average of one year and six months). They are also less likely to end their tenancies early, with just 6% doing so, compared to 9% nationally. Average void periods in Liverpool stand at 33 days, according to Direct Line for Business, though this is significantly lower for properties that meet renters’ expectations (with new build city centre apartments doing just that).

Zoopla reports an average asking rent of £839 pcm in Liverpool as at April 2019. As is the case in other UK cities, apartments tend to command higher rental incomes than houses, in many cases reflecting the superior location and on-site facilities that apartments are able to offer. Just 47% of Liverpool’s residents own their houses, compared to a national average of 63.4%, with 30% of the city’s population living in the private rented sector. In this fast-paced city, bright new city centre apartments have excellent appeal, attracting renters who demand the best from their central Liverpool homes.

50,000

1YEAR+

£839pcm

47%

Liverpool’s city centre population expected to reach 50,000 by 2020

Average renter staying for one year and seven months according to Direct Line for Business

The average property rental value in Liverpool according to Zoopla

Only 47% of Liverpool’s residents own their houses, compared to 63.4% national average.

L I V E R P O O L


NEWCASTLE

The largest city in the North East region of England, Newcastle is a bustling modern metropolis with a busy private rented sector. Famed for its literary past, friendly people, nightlife and emerging digital scene, the city is a melting pot of entrepreneurialism, business and academia. Its economy is a leading light in the North East and it is significant that Newcastle was chosen as the host city for 2018’s Great Exhibition of the North.


“High quality new homes in the right places will enhance labour mobility and facilitate future local economic growth. Well planned housing development will also support the city’s ambition to attract and retain professionals and graduates and to grow our own skilled workforce.” Newcastle City Council

As a result of its excellent entertainment options and cultural credentials, along with its fast-paced business environment, Newcastle draws in young people from across the region, many of whom are seeking contemporary rental homes in city centre locations. This has led to the recent rapid expansion of Newcastle’s private rented sector, which they city council has recognised as an essential means of retaining talented graduates and young professionals who might otherwise have to move out of the city to find suitable/affordable homes. The private rented sector is also key to housing Newcastle’s student body, as the city’s two universities attract some 60,000 students, while providing just 7,300 units of student accommodation.

NEWCASTLE IN NUMBERSJust 49.5% of Newcastle’s residents are owner occupiers, compared to 63.4% nationally, meaning that the city has a larger proportion of renters than many locations around the UK. In total, 19.1% of Newcastle’s residents are house in the private rented sector, well above the national average of 16.8%. Demand is strong for private rented homes and the city is working hard to meet that demand. Between 2002 and 2015, its private rented sector grew by 19.1% according to Newcastle City Council data.

As at April 2019, the average asking rent in Newcastle stood at £930 pcm according to Zoopla, with apartments commanding significantly more income than houses. With population growth of 7% projected by the ONS between 2018 and 2041, the city’s private rented sector is going to be under pressure to keep up with demand over the coming years, with an average of at least 1,000 homes per year needed between 2015 and 2030 in order to lay the foundations for housing all residents appropriately.

60,000

49.5%

£930pcm

+19.1%

Newcastle’s two universities attract around 60,000 students

of Newcastle’s residents are owner occupiers, compared to 63.4% nationally.

The average property rental value in Newcastle according to Zoopla

Newcastle’s private rented sector grew by 19.1% between 2002-2015

N E W C A S T L E


CITY COMPARISON


Birmingham Manchester London Liverpool Newcastle

Population (ONS, 2018) 1,147,300 553,500 8,965,600 495,300 297,400

Average asking rent: one-bed apartment (Zoopla, Jan 2019)

£643pcm £635pcm £1,800pcm £507pcm £548pcm

Average asking rent: two-bed apartment (Zoopla, Jan 2019)

£889pcm £968pcm £2,740pcm £740pcm £754pcm

Proportion of private renters

17% 26.9% 30% 30% 19.1%

Average rental yield (Telegraph/ Knight Frank, Dec 2018)

5.2% 5.8% 3.35% 7% 6%

Surrenden Invest is a property investment company specialising in UK property investment. We provide end-to-end property portfolio management.

ABOUT US We are a mixed team of property investors, property sales and lettings professionals and experts from the financial industry. We offer a unique blend of property and financial skills in order to best serve our investors.

Our focus is on providing the best deals for our investors in the right locations.

If you would like to know more about buy to let investment, we are here to help. We can answer any questions you may have and suggest properties that pair with your requirements. Simply contact our expert team in order to take your property investment ambitions to the next level.


We make no representation or warranty of any kind with regard to the information contained in this brochure and none of the information shall be treated as financial advice. The information is not an invitation to invest and you must rely entirely on your own investigations and due diligence before making the decision to invest. Any opinions expressed in this document are not statement of facts.

Riverbank House 1 Putney Bridge Approach Fulham London SW6 3JD

London Office: 0203 3726 [email protected]

rental market snapshot - surrenden invest...rental apartments garner higher incomes than houses,...

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