Many property pundits have been espousing the benefits of investing in the North West to take advantage of low buy-in costs and high yields. Manchester has taken many of the plaudits in past decades, but Merseyside is now coming to the fore with demand driven by the numerous large-scale infrastructure developments taking place here.
Liverpool had a difficult post-war period, but has been on an upward trajectory since being selected as the European Capital of Culture in 2008. The city has caught the eye of many investors in recent years with its diverse range of investment options available.
The city’s population increased 5.5% between the census of 2001 and the last one of 2011, and is due to pass the 500,000 residents mark this year, reversing the trend of the previous five decades of decline. The city region population is almost double that, at 920,000, making it the 5th largest metropolitan area in the country.
Some of the large-scale projects taking place in Merseyside that are driving this development include:
Liverpool Waters – a 60 hectare area north of the city centre set to create 2,000,000 sq ft of commercial space and 9,000 residential units.
Bramley-Moore Dock – the new home of Everton FC and the northern bookend of the Liverpool Waters scheme.
Liverpool L2 deep water port – taking the largest-size container ships for the first time.
Baltic Triangle – bohemian area south of the city centre emphasising gig economy start-ups.
Knowledge Quarter – high tech R&D and new home of the Royal College of Physicians.
Wirral Waters – 500-acre site with planning consent for 20 million sq ft of mixed-use floorspace and 13,000 homes.
With four universities, two Premiership football clubs and a vibrant nightlife, both the student rental and short-stay holiday markets are booming. There are now 70,000+ students in town and over 300 listings on Airbnb alone.
Portico produced data showing Liverpool investors were getting 15%+ gross yield on short-stay rentals at 50%+ occupancy rates. This compares favourably with the average 8.3% gross returns available from standard BTLs in the city.
But there is more to the area than the city itself and canny investors are looking beyond new build in the city centre for better returns.
Most people have heard of Anfield, the home of Liverpool FC. It is still coming off a low base but shows many signs of piecemeal redevelopment around the stadium area helped by the football club’s plans for Anfield Plaza. Further north, in Bootle, you can still buy a 3-bed terrace for under £50,000 that is ripe for investment.
Moving south, towards the airport at Speke, and you can pick up a 2-bed house for £65,000 that is ready to occupy, offering an 8.5% gross yield.
To get to the area most often overlooked by outside investors, you will have to cross the River Mersey to the Wirral. The west bank of the Mersey has long been neglected, but things are rapidly changing. Peel Land and Property, a private company who own most of the Mersey shoreline, have announced the rollout of Wirral Waters.
This is a transformational plan for the area and will offer investors the usual options for off-plan apartments. However, the more exciting opportunities may be in the surrounding areas of Birkenhead and Wallasey which both have a wide range of older properties ready for redevelopment.
In south Birkenhead, around the Rock Ferry area, you can buy a large 4-bed house with two reception rooms for renovation for £70,000. Large family homes here rent here for £650–£695 pcm. Property in what the locals call “the North End”, close to the Wirral Waters site, are even cheaper.
Wallasey has a particularly wide range of options for investors with many small circa 1920s-built 2 and 3-bed terraces available. Further north, towards the seaside town of New Brighton, the redevelopment of the town centre by Neptune Developments about 10 years ago regenerated the area and brought many new leisure businesses to the town.
Property prices are still depressed and represent particularly good value when compared to the surrounding area. Older retail shops in the town centre with residential overs are especially good buys, as are larger Edwardian mansion houses on the cliffs looking north to the mouth of the Mersey and beyond to Blundellsands and Southport.
HMOs are currently very popular with many investors and fall into three distinct camps here.
Student HMOs – difficult to complete with the numerous purpose-built student units coming on line, but a good buy if you can offer large rooms in a good-quality house at prices that undercut the new build, which are £110–£135 pw. A 5 or 6-bed student house in the Smithdown Rd area will be a decent buy and generate a double digit net yield if done correctly – but see the comments on Article 4 below.
Professional HMOs – buy only in the city centre. Beware buying off-plan as numerous schemes sold on fractional development have fallen into receivership. Also avoid the ubiquitous 'guaranteed rent' schemes; they never seem to work for anyone but the developers. Caveat emptor, and never use the developers' recommended solicitors.
Blue collar HMOs – investors are looking to scale up for the influx of builders needed for the various projects. The suggestion is that there may be up to 3,000 out-of-area tradesmen working on Wirral Waters alone when it ramps up to full capacity. A large house is available for £98,000 in the Wallasey area close to the building site. At a cost of £20,000 it could be transformed into a 5-bed HMO, bringing in £26,000 pa, on a gross yield of 22%.
A word of caution if looking at HMOs. Both Liverpool and Sefton Councils have introduced Article 4 Directions in certain areas. This will prevent you using a C3 planning use class (standard family home) as an HMO (C4 or sui generis classes) unless you get planning permission. You won’t get it.
An investor approached me only this week having bought what they thought would be a great 5-bed HMO in Bootle. It was a difficult conversation to tell her that she had overpaid for a standard 3-bed house and would have no chance of recouping her investment in the coming years. There is no Article 4 in Wirral at present, although the council are actively looking at it this year.
Whilst discussing councils, many readers may not be aware that Liverpool City Council have just had their application for renewal of their city-wide selective licensing scheme refused by the government. They were the last council to implement area- wide landlord licensing five years ago before the government of the day tightened the rules.
Selective licensing was never meant to be a tax on landlords, and the city-wide scheme was perceived as just that. They will now have to provide the data to back up their request to introduce schemes in particular areas of housing market failure and social deprivation. I am a fan of selective licensing where it is needed, and the Liverpool scheme produced many benefits. However, I am glad to see them being forced to row back the scale of their ambitions to a more sustainable level.
In summary, Merseyside offers some fantastic investment opportunities in the current market. There are a very wide range of possibilities from new build, to commercial to residential conversion, to HMOs and standard BTL.
The area is as diverse as the property types and there are pitfalls for the unwary. But with some thought and a bit of planning, you should be getting better yields here than in almost any other part of the country. The icing on the cake is the prospect of decent capital gains driven by the major developments in the city region.
Even if you don’t invest, it's a great place for a short stay break. Whether you are here to glam it up in a boutique city centre hotel or up for the craic in one of the many Irish pubs, you are sure of a warm welcome and some great memories. Welcome to Liverpool – the gateway to the world.
Andrew McCausland 'washed up' in Liverpool 25 years ago and has been investing in property since then. He is the owner of Wirral Property Group, a building and development company, and Hamilton Square Estates, an estates and lettings agency - both based in Birkenhead.