The lure of city living has propelled Leeds to the top of a UK house price and rental growth league table.
Leeds is now rated as the UK’s top prospect for house price and rental growth in the UK, according to JLL’s latest forecast.
The city knocks Manchester off the number one spot, a position it has held for the last four years.
JLL believe that house prices in Leeds will grow by 17.1 per cent by 2023 while Manchester could see a 15.9 per cent rise and Liverpool a growth of 12.6 per cent.
Rental growth in Leeds is also forecast to rise 17.1 over the next five years compared to 16.5 per cent in in Manchester and 15.9 per cent in Liverpool.
JLL say that in recent years, cities in the north of England have established themselves as standout performers in terms of residential investment and development.
The lure of city living and a lack of housing supply has helped push up values with Manchester, Leeds and Liverpool seeing supply shortfalls due to demand from people keen to live in the heart of the cities..
Yorkshire as a whole could see house prices rise by an average 10.4 per cent by 2023, while the North West could see a 12 per cent growth. JLL predict that Greater London will be the top-performing region with a 14.8 per cent gain and the North East with a 6.6 per cent increase seeing the lowest rise.
The predictions assume that a Brexit deal will be made and there will be a transition period until the end of 2020.
In its role advising investors and developers, JLL warn that “ political headwinds” have left some sectors of the residential market presenting more inviting opportunities than others.
It adds: “It will be important to ‘Find the Gap’ rather than to blindly back residential in the broadest sense.”
JLLs “Find the Gap” report tips Leeds as its best bet for UK investors due to its potential.
Compared with other major cities, and more locally with York and Harrogate, residential property values are typically lower in Leeds.
This, coupled with a lack of new development in the city centre since the global financial crisis and ensuing property crash in 2008, means JLL anticipates values to increase by an average of 3.3 per cent a year over the next five years with rental growth forecast to increase by an average of 3.2 per cent per year over the same period.
This is well above the UK average forecasts for 2.2 per cent price growth and 2.4 per cent rental growth.
Charles Calvert, head of JLL’s residential team in Leeds, says: “There remains very little development of apartments for owner occupation in Leeds. The majority of schemes that have been completed in recent years have been marketed off-plan and targeted at buy-to let investors. These schemes are relatively small in scale and the majority are office-to residential conversions. We believe that there is significant pent-up demand for high quality, highly specified new apartments within the city which will attract a significant premium over existing stock and we have buyers queueing up waiting the delivery of the first scheme to deliver this level of quality.”
He adds that a total of 29 sites have been identified that could deliver in excess of 10,000 apartments, doubling the existing number of flats in the city centre.
However, only 45 per cent of these developments have planning permission. This means the schemes will be delivered over several years, reducing any risk of a short to medium term over-supply.
The majority of the schemes in the pipeline are build to rent developments. Legal & General’s 250-unit Mustard Wharf and Aberdeen Asset Management’s 111-unit Aireside on Kirkstall Road are the most recent schemes to start on site.
The total number of private rental apartments currently under construction totals just over 1,300.
JLL say demand for land in the city centre remains extremely strong driven by the shortage of supply. The majority of investors weighing up the city have private rental or student housing schemes in mind.
The average price and average rent for a two bedroom apartment in Leeds remained flat in 2018 at £180,000 to buy and £895 pcm to rent.
In Manchester city centre, a two bedroom flat costs an average £255,000 and the average rent is £1,135.
In Liverpool, a two-bedroom flat is £195,000 to buy with a monthly rent of £1,000.
JLL say the the main risks to its assumptions is that UK economic weakness is prolonged by a year or two and the Brexit deal negotiated and approved is not as favourable for the UK as assumed.
It believes that this would still result in an economic recovery, but a weaker upturn after 2019 compared with our base case assumptions. The third risk is that the UK exits the EU with no deal. And whilst we deem this to have a probability of less than 10 per cent at present, it would result in a far weaker UK economy over the next five years.