The numbers don’t tell the full story – Return on investment in city property and the human factor
City property investment strategies are one of the best options for your money as many of our multiple investors recognise. It never does any harm to review and remind ourselves of why though, so let’s take a coffee break sized run through of why city property is such a big draw for investors.
The rental property market is growing and likely to continue to grow
There is no doubt about how attractive the property market is for investors. While other potential places to put your money such as playing the markets or a low yield savings accounts have their charms, property remains a top destination for the professional investor. There are a lot of reasons why this is the case, but the bottom line is that property increases in value. That has been the situation for hundreds of years. Putting money in bricks and mortar has always been safe and paid well.
Despite what the world looks like or the gloom on the news there is still demand for homes and there always will be. We could probably end this article here because that seems reason enough. Read on though. The property market, and in particular the city property market, is really interesting at the moment.
This could be an incredible time to invest in city property
We have been in property investment for quite some time, and we specialise in finding the right opportunities in the most interesting places. Honestly, we love the space we work in because it’s such a fascinating market. Right now, we think the city property world is poised to leap forward.
In purely business terms buying a property for rent is a simple enough transaction at heart. You pay X amount for a property you get Y amount in return for that investment. The better the ratio of X to Y and some other factors that we discuss below, indicate how shrewd that initial purchase was in terms of your return on investment. For something like our St Annes Gardens development in Liverpool, you can look to your investment returning 8 – 9% pa. That’s a pretty good return. As the buy price is very attractive as well, it’s clearly a good deal. As I said that calculation is not exactly rocket science good price and good return mean a solid proposition.
However, there are other factors to consider and top of the list is the question ‘will it rent’?
‘Will it rent’ as a measure of likely ROI
The problem with X = Y style measurements is that they are economically sound, but they don’t always reflect the real world. In the middle of all the maths is a variable that often isn’t accounted for. For the money to be there to create that return on investment, people will need to be in the property paying rent. People though, as we all know, are not quite as reliable as X =Y economics yet the success of your investment relies on them..
So, if we accept (and we really should) that human beings are directly linked to the return on your investment, we need to assess what will motivate them to make an informed decision. When you look at some of the factors that are motivating people at the moment and extrapolate out to the mid long term, the city rental world gets very interesting indeed.
From the point of view of a renter, a city apartment usually has one or both of two main motivators. It is near where people work and/or they like the lifestyle offered from being in a major city. The latter is not really in question. There is no doubting Manchester or Liverpool for their music or cultural scenes for example. The first motivator though about being nearer to work is where things are interesting. The investment and growth in many cities are phenomenal. Gentrification and high-tech developments are attracting major investment from the UK and Europe. With unemployment so low, businesses are also making city centre jobs more attractive in terms of salary and benefits. That means jobs now, but just as importantly, these are not going to vanish in the short term. As the employees perhaps move out of the city as their families grow, younger professionals are in the wings waiting to step in and take their place.
Which brings us to another motivator. The next generation of renters are accepting of the fact that they are not going to be early house owners. They are planning to save for their own property later in life, and that means renting now.
The convenience of renting close to where they work is a significant factor in how they approach their property needs. Where many used to consider renting outside the main city for a slightly lower rental, the cost of commuting, the need for a car and things like the hit from increased utilities spend in older buildings, often offsets this. Financially, being in the city centre makes sense.
Finally, and crucially, the need for property is growing and the available properties are not necessarily keeping pace. As with any commodity this is driving demand and price. Renters understand this very well and they are not looking to move around, they are looking to rent and stay.
So, to summarise, city centre property rentals are in demand, paying high returns, affordable as an investment and the market needs then. Most importantly, they have the ‘human factor’ that are meeting the financial and lifestyle needs of the very people who will provide the return on your investment.
Call us and we can run through the available properties to see what is going to work best for your money.
There is no lack of choice when it comes to buying an investment property. The question is not so much whether to invest but where to invest. We suggest you look north.
Why the north of England?
With what looks like difficult financial times ahead, there is going to be no shortage of offers, deals and dubious ‘grab it quick’ opportunities for investors. The bottom line though is that, while there is no such thing as a sure-fire investment, there are some that stand out as having more potential for growth and less risk than other. One of these is the north of England and in particular the city hot spots.
Northern England has been a development opportunity for some time now. Post-pandemic it is continuing to attract attention from investment at pretty much every level. Since, nowhere has quite the reputation for straight talking as the North, let’s be plain about the main reason why it is so popular. Compared to other parts of the country cities such as Liverpool, Sheffield, and Manchester provide excellent opportunities for existing business and start-ups, and therefore also property investment money. Outstanding properties can be purchased for a fraction of the cost of other metropolitan areas, and they are in demand. The relatively low prices seen for property also carry through to the more general cost of living and the cost of doing business, making the area attractive on every level. It seems logical then that If we see a continuing trend of rising costs, businesses looking to invest (and the potential renters that work for them) will continue to look at cities like Liverpool and Manchester.
The Northwest of the country really is a great example of the potential investment opportunities available in the UK. At the moment, the level of growth in the area is such that even if the economy stalls the local economic landscape could well provide a growth bubble and, if that doesn’t happen, there is already a steam roller of growth in progress that is unlikely to stop. In terms of property price growth alone for example, the region is one of the strongest in England.
Liverpool- A growing investment centre
As well as being one of the most distinctive cities in the world, Liverpool is growing and developing at a rate that is the envy of many other areas. Property price growth has been steady and impressive for years now. Liverpool achieved an incredible 10.6% increase in average house prices during the Summer of 2021 and, although this is naturally slowing a little now, it is still growing at a rate that should outstrip most, if not all, major UK cities.
Not that the phenomenal growth has impacted on the potential for investment as a lower cost option. If you look at our listing at St Annes Gardens as a guide you can clearly see the potential for the area. St Annes Gardens is located close to the city centre, less than a mile from some of England’s best shopping and dining, within walking distance from the rail link and similarly close to the knowledge quarter which is home to the science park and a major centre for UK innovation. Yet, the price of investment in an apartment in the extensively renovated area of St Annes Gardens, is only in the region £135,000.
Manchester – A heritage of innovation and growth
We have been singing the praises of Manchester for some time now. There is no doubt about the heritage and quality of life it represents. There has been an incredible amount of investment in the area both in terms of urban renewal and business and innovation. Again, our property at Botanical Gardens, Trafford shows just how cost effective an investment in the Northwest can be. Property prices has risen at near Liverpool benchmarks and the city itself has grown alongside them. Trafford is typical of a Manchester areas development. It is unique and yet invested in the heritage of Manchester with a remarkable 200 listed buildings, great schools and excellent transport links and public transport infrastructure. Again, as with Liverpool, the prices are low enough that investing in property here is one the best options in England.
If you are considering a property investment, then we do recommend you look to the North and the Northwest in particular right now. There is nowhere like it and there are few places that offer the same potential.
Call us if you want to know more. We are always, we are happy to talk.
Property has track record of success that few other options can match. There are few investment opportunities that can claim the same consistent level of reward.
Why is property such as popular option for investors?
When it comes to deciding where to invest next, there is little doubt that property is, and probably always should, be on the agenda. Many of our clients have multiple investments in a range of properties and often other markets as well. Shrewd investors have been acquiring property as standard practice for hundreds of years and main reasons why hasn’t changed. Property pays a good return in several ways. As with any financial strategy though it will not be right for some, so below are just a few thoughts on the current property investment market, particularly when it comes to city living.
- You are investing for the long term
Property is not usually a quick return. Most of our seasoned investors look to their property portfolio as a long game strategy. Values rise over time and that increase has also been consistently above the rate of many other investments. Of course, there are property developers who will look to ’flip’ an investment quickly but that is a much more volatile market and a more intense process. If you are looking to a quick investment return, then clearly rental property may not the best option. If you are playing a longer game, then it is certainly worth more than a look.
- Developing areas offer a good return
One of the big decisions to be made when it comes to investing in rental property is the location. 55 Queen Street, Manchester, for example, is one of our hottest property offers at the moment. It has the advantages of city centre living as well as being in a rapidly developing area with heavy investment, which means multiple employment opportunities in a range of sectors. Yet, because it has the Manchester location advantage, properties start at just above the 160,000 mark and return from rental ranges up to 2k a month for high value properties. Compared to other areas it currently represents a very attractive investment opportunity. As Manchester develops, these apartments are unlikely to lose their appeal to investors, but they may well become less available. So, they are worth considering if you are able to acquire them soon and add them to a long-term investment strategy. Other areas such as Bastion Point in the heart of Liverpool have similar potential, so there are plenty of options.
- Renting is a convenience for professionals
Since the shift to the ‘gig economy’ style of contract working, renting for the duration of a working contract is becoming the new norm. As the cost of commuting rises, we are also seeing higher demand for city centre living accommodation. Many mid – high income professional and couples are looking to enjoy all that a bustling metropolis has to offer, while still being close to the workplace. Many apartments are also spacious, well-appointed and located centrally so that hybrid working also makes them an attractive life choice.
- Renting is becoming the norm
The bottom line is that despite government schemes and incentives from several sources, buying is often not an option for many people. The cost of deposits, mortgages and the difficulties obtaining finance on any property, let alone a prestigious city apartment, are often prohibitive for many. Renting is now the first option for many and this is tending to become more common. That means a demand from the marketplace that is unlikely to change.
All of the above should also be put into the context of the remarkable reliability of property as an investment. While there are spot changes to the market it has consistently proved to be a strong, reliable, long-term investment since records began. Of course, there are no guarantees but that is true of pretty much all investments. If city centre property is not appealing to you then there are other opportunities, and you should look at all your options. If you do fall into the category of investor who is able to take advantage of city centre rental property opportunities though, it would seem prudent to look at what is available considering the above points and other factors.
While there is probably no such thing as a sure-fire investment, there are some that have proven themselves to be far more reliable than others. With such a clear track record of success and the current demand for homes, property must be considered one best options for a long-term investor. That said, it always has. So, for the potential investor looking at property there is a comfort in knowing that the more things change, the more that stay the same.
Call us and let’s talk about how we can help you find the right investment property for you.
There is no lack of property investment opportunities in the UK, so why are so many investors are looking to Manchester? The answer is simply that the North, and Manchester in particular, are fantastic options for investors compared to other UK cities.
Why is Manchester attracting property investors?
Well, let’s start with the financial advantage. The cost of property is very attractive for any potential investor. Our current property on Queen Street is a fantastic example. With the price of apartments in this location currently starting at sub £170,000, Manchester compares very favourably with other city locations. For context, the price of a comparably located apartment in London is often 3 times that of this particular property. Which means your potential investment in a single apartment in London could give you multiple investment further north. With a rise in market value of almost 10% and steady growth in the past year, a rental investment in somewhere like our Queen Street opportunity is a very attractive option for the long, and short term, investor.
The truth is though that there will always be potential opportunities available for investors. The property market is thriving, and it is awash with possibilities. So, while a few moments of research will tell you Manchester is clearly a sound financial option as an investment, so are some other opportunities. So, what is it about Manchester that makes it such a desirable place for investors?
The Manchester property rental difference.
Homes are rented for lifestyle as much as price or convenience. The key to a good rental property investment therefore is to ensure it is in an area that is currently attractive to new tenants. Just as importantly, you want it to remain attractive and even become more so over time. This is where Manchester wins over other cities. When it comes to desirability it is a textbook example of great city living.
Employment potential is always a key factor for a property location. The low cost of being located here makes it one of the most attractive business settings in the UK. Manchester is now home to regional branches, and often the head offices, of some major brands such as Siemens, KPMG, Adidas and AstraZeneca. Continued overseas investment also makes up a significant part of the Manchester business landscape. With post Brexit concerns, the cost of locating in the capital and independence ambiguity in Scotland, European businesses are naturally eyeing the opportunities presented elsewhere. With uncertain times ahead, the sensible option for business seems likely to continue to be the more cost-effective option of the north. The city is actively encouraging growth and welcoming investment.
Air travel, train and road access are all exceptional and, of course, this will only become better with the advent of HS2 which is expected to boost the economy dramatically. With its existing infrastructure and continuing development opportunities, Manchester stands out as the destination of choice for business and that means more jobs and therefore the increased demand for homes for employees who fill those positions.
The ultimate in city living
As a place to live, Manchester is alive and buzzing with everything from cultural highlights such as the Whitworth gallery and Imperial War Museum through to a night life that is second to none. The music scene is known worldwide and as it carries the legacy of musicians such as Oasis, The Hollies and The Happy Mondays it’s no wonder that the city has a reputation for producing great talent. World class restaurants abound as do small, independent eateries. Award winning vegan kebabs now ply their wares in the same marketplace as traditional fish and chip shops and the street food is something that must be experienced. Street Markets, incredible shopping, new developments and not to mention the innovation of Salford Quays, are all on your doorstep. Sport is also part of the beating pulse of the ‘football town’ with some of the biggest stars playing at the world-famous Old Trafford.
It wouldn’t be fair to miss out one very important aspect of Manchester that makes it so desirable as a location. One often quoted downside of city life, and a reason regularly cited as to why so many people are leaving London, is the lack of green spaces. As fun as city living can be, we all need to get away from it all now and again. Walking out of the Queen Street development you are literally 30 minutes by car from some spectacular countryside and just over an hour or so by public transport to incredible spaces like the Pennines and the Peak District, as well as some traditional seaside towns. It is a cosmopolitan city practically in the countryside.
Manchester is also the new city of stars. The Media City development is the home of major broadcasters and has some of the most in-demand production facilities in the UK. Located on nearby Salford docs, it is the expanding home of the BBC and ITV as well as a busy tourist, leisure, and shopping destination.
With its ongoing employment opportunities for young professionals, a greed for more talent as it grows, continued investment and a vibrant and attractive city living space minutes from spectacular countryside, Manchester has far more to offer than a good investment opportunity. It has a legitimate claim to being the beating heart of a developing new economy. It is this that will encourage the continuation of the already buoyant rental and property sales market.
At the end of the day, yes, there are other locations with opportunities for your investment, but they are not the unique combination of financial advantage and living experience that is Manchester. It is that individuality that means your investment is in the right place.
As of writing this, we seem to have dodged a recession. However, many economists are still warning of difficult times ahead. This raises all sorts of questions about investment, not the least of which is whether property is still a good option.
The ‘will there be a recession’ problem
There is a problem with predicting a recession right now because the situation we are in has never been seen before.. That said, we probably do need to accept that many of the usual drivers for a recession are already showing. Inflation is rising, the pound isn’t looking particularly strong, the base rate is up here and overseas, and so on. However, before we get all gloom and doom about things, we need to take a breath.
If you are old enough to remember previous recessions and turbulent economic times such as the crash of 2008, you will know that this one is rather different. There has never been a modern economy recovering from a pandemic, for example, so there is no precedent to apply as to what effect that will have. Other oddities like low unemployment, most major industries still being strong, the base rate is up but it’s still relatively low, and the continued investment from overseas, are also in the mix. It is going to take a brave soul to confidently predict where the economy will go next in these choppy economic waters.
Recession or not, is it a good choice to invest in property?
With everything that has happened in the last few years, and the current market, you certainly need to think carefully about your investments. However, hasn’t that always been the case? In the end, when you consider investing in something like a city centre apartment, we are talking about a significant amount of money. So, should you be careful? Well, yes, of course you should, it’s a major financial decision. There are a lot of things to consider but, when you stand back from the situation, a potential downturn in the economy is just another factor in the overall picture. It isn’t the be all and end all of your assessment.
The fact is that property has always been one of the most popular choices for investors for some very good reasons.
- Property has regularly increased in value.
- We have all witnessed the value of property dependably rising for many years now and it has done, for the most part, for nearly a century.
- Recessions, depressions and market crashes come and go.
- Very few investors looking at a rental property are doing so for quick gain, so playing the longer game is not unexpected.
- All markets are about supply and demand, and demand for property is high.
- There is no shortage of tenants looking for somewhere to live. When the demand is there, a market is always open.
- Recessions are national but local factors make a difference.
- Cities like Liverpool and Manchester are booming and that means people looking for homes.
- When you are considering investing in property you budget for possible downturns.
The chances of any investment having some ups and downs are very high. Most seasoned investors simply see a downturn as an inevitable part of life and expect that it will be a matter of riding it out.
As I mentioned at the beginning of this article, the threat of an imminent economic crisis appears to have reduced considerably. Maybe it will be back maybe it won’t, but experience says that it takes a lot to make property investment unattractive to the long-term investor. It isn’t that I am not taking that threat of recession seriously, of course I am, but to be honest the property market is about more than bubbles in the economy. There is little that has the same resilience as property value and very few things are as reliable as bricks and mortar when it comes to investing.
Perhaps the actual question of whether it is a good time to invest in property is flawed. If you are an informed and shrewd investor, as all our client are, then can there ever be a time when it is the wrong thing to invest wisely? In the middle of the great crash of 2008, the average property price was hovering around the £168,000 mark. Last year it was just over £230,000, that probably says more than anything else about the long-term value of property investments.
I mentioned Manchester and Liverpool earlier as good potential investment areas. Whatever happens with any other factors, investing in the right property, at the right time is clearly going to make your money work harder for you. Somewhere like city centre Manchester, which is developing a new economic energy, is always worth considering. In the end it will always be about being able to invest well, invest wisely and find the right location to do so.
I should end with the usual statement that this article is not intended as financial advice. It is speculative look at the possible impact on the market of a recession or near recession. It’s my opinion, not guidance. Nobody can predict the future and the world is a pretty unstable place right now. I advise, as I always do, that you go with your own judgement. If the little voice in your head is telling you property makes sense, only you can decide whether to act on it.
Call us, let’s talk about where you could invest and, of course, whether it is right for you.