The Dire Housing Crisis Needs The Help of Property Crowdfunding
The housing crisis in the UK doesn’t just restrict our ability to provide the much-needed homes the country’s population needs. It’s also, according to Katja Hall, the Deputy Director-General of CBI, costing UK households £4bn a year.
Of this figure, £3.2bn is down to increased housing costs, and the remaining £770m is due to higher transport costs, as inability to live near work drives more people to commute expensive distances from work. This is, of course, exacerbated by soaring fuel prices and train fares.
Housing shortages are also pushing up market rent at a time when, for the majority of households, disposable income remains weak. The high cost of moving home and lack of decent and affordable housing also deprives businesses of the flexible and mobile workforce necessary for them to grow and thrive. In short, people and businesses are paying the price for our lack of new homes.
We know that we need to double the number of new homes we provide every year to meet demand, and have been falling shockingly short for years.
House Builders’ Hands Are Tied
Combined with difficulty accessing available land for building on, despite only 10% of the UK’s land being developed, access to finance continues to pose a major barrier for small and medium sized house builders, further exacerbating the housing crisis. The government needs to focus its spending on capital investment in housing stock, but house builders also need access to alternative forms of finance in order to make a dent in the provision of new housing.
Secured peer-to-peer lending to house builders offers a marked solution to the problem. Provided house builders can secure planning permission, access to finance through the property crowdfunding industry has the potential to keep house builders afloat, whilst simultaneously assisting with the provision of these desperately needed new homes.
Property Developers Need Finance
Along with the problem of providing new builds, there are also an estimated 650,000 empty properties in the UK, over 200,000 of which have been left empty for over six months. Whilst house builders take care of the situation of building new accommodation altogether, there is also much scope for developers.
Many of the empty homes in the UK require significant renovation, and one of the barriers for developers who would do so is the un-mortgageability of these properties. Properties come up for sale by auction all the time, but without ready access to funding, there is no way for most people to take up the investment.
Bridging finance, again offered within the property crowdfunding model, can tide investors over so that they may make those time-sensitive investments. Peer-to-peer funding for renovation work also opens the doors to small and medium-sized property developers to work their magic and provide modern, high-quality homes.
Equally, straight-up crowdfunded investment projects do the same job of bringing high-quality housing to market.
The Government’s See-Saw Success
Government investment in build-to-rent is promising, with a £45m cash injection for 2,000 new homes in the North being announced late in 2016. However, optimistic news back in October of government promises for 225,000 new homes by 2020 was shadowed by the mention that only 15,000 of these would be ready for habitation by then.
Realising their inability to cope with the housing crisis themselves, the government has recognised the solution that the property crowdfunding industry is offering to the crisis, and has provided significant investment in the model.
We are confident that the property crowdfunding industry will be instrumental in helping to alleviate at least some of the problems with UK housing stock, whilst also offering an alternative investment option for those seeking to invest in the property market themselves.
A £45m cash injection has been announced by the UK Government to kick-start the construction of 2,000 build to rent homes.
As the Government clamps down on the buy to let sector, it has announced that it will be driving £45m of its £3bn Home Building Fund, in a move to create a “bigger, better private rental market”.
The deal is one of the largest for the private rental sector in the UK, and is focusing on creating thousands of homes in Leeds, Birmingham and Manchester.
Housing Minister, Gavin Barwell, is also confident that it will “create jobs and opportunities for many hundreds of people”.
Along with the £45m from the Government, funds from HSBC will also be used to back the £400m project. 995 of the purpose-built housing units will be in Manchester, which has the highest rental yields in the UK outside of London: 774 more will be built in Leeds, and 323 in Birmingham.
In the Autumn Statement, issued in November, it was also announced that letting agent fees for tenants will be scrapped. This is just part of the Government’s plan towards tighter regulations, and improved quality in rental accommodation for the £5.4m households who rent across the UK.
Built To Rent To Replace Buy To Let
These plans follow on from George Osborne’s clampdown earlier in the year, ending mortgage tax relief and raising stamp duty. Both moves were intended to curb investment into the buy to let sector, and these latest moves demonstrate a new focus on build to rent, which Knight Frank estimates will be worth £50bn by 2020.
The private rental sector in the UK is at an all-time high, and showing no signs of slowing down. As prices on residential property continue to skyrocket, it has never been more important to invest in new housing across the country.
The building and development of properties for the rental market, is one of the key aspects of our work at The House Crowd. Along with offering a more democratised property investment market for those seeking to raise capital through property, we are also confident that our investment opportunities are doing a great job in providing high quality accommodation across the rental sector in the North West of England.
It was recently announced that real estate and private equity fund manager, Moorfield, has agreed a deal with Manchester-based property development firm, Glenbrook, to deliver a £40m build to rent scheme at Ellesmere Street in Manchester city centre.
The scheme will offer over 200,000 sq ft of accommodation across three buildings, ranging between 8 and 12 storeys.
Construction will take place at the end of July, with completion scheduled for summer 2018.
Moorfield’s Chief Investment Officer, Charles Ferguson Davie, mentioned in a recent CoStararticle : “The Build to Rent sector is in its infancy and we are proud to be at the forefront of it. The sector forms a fundamental part of many cities’ wider residential strategies and we intend to develop more schemes across the country and so help deliver much needed housing supply”.
He also stressed that the Brexit vote has caused a lot of uncertainty, especially for property developers and investors, but feels confident that Moorfield’s commitment to the BTR sector has a wealth of exciting opportunities with an aim to build a 2,000 unit platform.
Glenbrook’s director Ian Sherry, also shared his thoughts on the project, he mentioned that he strongly believes the private rented sector will be resilient, a belief which has been underlined by the property developer’s commitment to bring forward over 750 further units which are planning stages across the region.
In addition, Manchester Place’sCEO Paul Beardmore is also confident about the BTR sector in Manchester. He sees the sector as a fundamental part of city’s wider residential strategy and to deliver additional housing.
The gateway scheme which has been designed by AEW Architects, includes a co-working space surrounded by gardens, concierge facilities, a well-equipped gym, basement car parking with car hire facilities plus an abundance of cycle storage.
A Great Time for Buy-to-Rent Residential Property Development!
According to Legal & General, while Brexit might be putting off large-scale personal decisions such as house-buying, at the end of the day, they still need somewhere to live – so the rental sector has huge potential during these uncertain times.
Dan Batterton, the rent to build fund manager at Legal & General recently mentioned in an interview in Architects’ Journal :“We are hearing demand from more people wanting to rent and not wanting to buy. When we look round the world to established build to rent markets, such as the US, the rental sector provides consistent demand to the construction industry regardless of market conditions – it is less cyclical than building for sale.”
He also says that there may also be less competition for land between now and the end of the year because traditional housebuilders are known for pausing land acquisition programmes, which allows BTR investors to make their move.
BTR schemes are known for providing large communal areas and building a sense of community, which is essential for ensuring people stay. Having areas (as mentioned in the Ellesmere Street example) where people can socialise, make friends and will therefore make them rent for a longer period than see before, plus will help drive yields for investors.
Manchester has come of age, and can now proudly boast the title of Capital of the North. It is a city rich in modern cultural vibrance as much as historical heritage; a magnet for the creative, forward-thinking minds of the future. Manchester is a bona fide example of a 21st century city, on course to continue with the exciting growth we’ve seen there in recent years. As such, the Manchester property market is an absolute hotbed of money-making potential.
Another reason to invest in Manchester in particular? By 2050, it is estimated that a staggering half of all households will live in cities. Homes are set to become smaller and smarter, whilst cities – of course – offer the facilities, entertainment and lifestyle options that are simply not available in the suburbs.
So, with all that as an introduction, let’s get stuck into looking deeper about why investing in property in Manchester could be the ideal investment decision.
Regeneration and Investment
There are so many regeneration projects either in progress or on the horizon in central Manchester at present, it’s hard to know where to begin. But we’ll do our best.
Located within a strategically valuable gateway location in south western Manchester city centre, the Cornbrook Hub is situated close to the A56 Bridgewater Way, with good access to Pomona Island (part of the development site), the Bridgewater Canal, and with the Cornbrook Metrolink station central to the site. This Metrolink station is key to the city’s public transport network, and therefore vital to the success of this development area.
Right now, despite its great location, Cornbrook is an underutilised part of the city, occupied by open storage yards and scrap metal merchants. It’s these that are detracting from the massive potential of the area, and making it incompatible with recently regenerated St George’s Island, and new proposals for Pomona Island. In short, there is a huge amount that this area of the city could offer. You can see the full regeneration proposal here.
Nonetheless, all signs point to a strong future for the area, and it’s likely to be a prime location to consider for early investment opportunities. Watch Cornbook closely.
Set within close proximity to the city’s retail hub, near to the Salford city border, the Medieval Quarter is a culturally and historically rich area of the city. Home to both Chetham’s School of Music and Manchester Cathedral, as well as the National Football Museum, new developments within the area are promising.
Not only is the destination itself prime territory, it’s also an ideal route to the main business sector and retail core of the city. Proposed new developments will expand on the green space and tree coverage in the area, and seek to drive the Medieval Quarter’s attractiveness to potential new residents. Find out more about the Medieval Quarter proposals here.
East Manchester, specifically the areas of Ancoats, New Islington, Beswick, Miles Platting, Openshaw, Clayton, Newton Heath and Gorton, has undergone substantial redevelopment in recent years.
It was the part of Manchester most severely affected by the industrial decline of the 1970s, in which over half the area’s manufacturing jobs were lost. House values subsequently plummeted. As a result, the area spent a long time in a state of impoverishment.
Things, however, are now on the up. Huge investment in the creation of family neighbourhoods – involving the construction of over 5,000 new homes, and the improvement of over 6,700 – is now paying off. Three new shopping centres, two new health centres and seven children’s centres have appeared, as well as 1,300 local companies supported by business advisors, and nearly 200,000 square metres of prime commercial floor space has been built.
In the Ancoats area, design-led apartment blocks have been integrated into well thought-out and sustainable neighbourhoods. Though most have been snapped up already, construction is still going on, so it’s worth registering an interest, particularly if the words ‘edgy’ and ‘progressive’ appeal to you.
Similarly, New Islington is worth a mention. Located within Ancoats, Urban Splash (the renowned Manchester property developers) have been behind the creation of this brand new community. They brought in avant garde architect Will Alsop to design the housing stock, which is aimed at families (there’s a lovely, fresh ‘free’ primary school here), both rental and owner-occupier.
As a result, East Manchester is now quickly becoming an area renowned for its business prowess. It shows promise in becoming a significant employment location, with successful companies choosing to locate themselves in the new and thriving area.
90 rental apartments in the Ordsall 11-storey tower block (200 metres from Salford Central station), a mix of cafes, bars and restaurants, outdoor events space and a new public square, form just part of the development.
A further 100 apartments have already been built on the site of the former Vimto factory, and 372 flats within a 15 storey ‘Manhattan-style’ block on Woden Street are in progress. 580 apartments, boutique studios and townhouses are proposed for the £75m Adelphi Wharf scheme. 36 townhouses with rooftop gardens have received planning permission overlooking the river.
All in, over 1,000 new homes, along with hotels, shops, leisure facilities and restaurants are expected in New Bailey. This is estimated to bring 11,000 jobs to the area.
Just as with most aspects of Manchester right now, the city has ambitious plans for the future of its transport networks. There’s a long term vision in place (see video below), but they’re working in five year increments to keep improvements moving constantly into the future.
Greater Manchester’s Transport strategy is focused on devolution of powers and funding from central Government, pushing for greater local determination of policies, funding and delivery. In short, it has big ideas, and wants to be in control of making them happen. That explains why their plans reach forward as far as 2040.
We also investigated the Annual Survey of Hours and Earnings, and found that the median weekly wage for residents of the city of Manchester was £392 in 2015, just shy of the median for the north west as a whole (£401). The median figure for the whole of England in 2015 was £430.
Some more data for you to chew on:
The 2011 census showed Manchester to be the fastest-growing city in the UK, in terms of population
Greater Manchester is home to more multi-millionaires than anywhere outside London, with the highest levels attributed within the City of Manchester itself
Manchester rates 7th in the 2016 mid-year Quality of Life index for Northern Europe, behind Edinburgh (1st), Copenhagen (2nd), Reykjavik (3rd), Helsinki (4th), Stockholm (5th, and Tallinn (6th). London, by comparison, is 12th. It is also ranked 6th in the UK
Manchester is rated second most globally influential city in the UK after London
Research at the University of Manchester is ranked the third most powerful in the UK, behind Cambridge and Oxford
Along with London, Manchester featured in the top 30 cities in the world for investment. Of the top 30, Manchester was 12th for the highest proportion of urban economy derived from financial and business services
We think we’ve made it fairly clear how highly sought-after the City of Manchester is as a residential area. But let’s look a little deeper into what an investment in Manchester property could mean.
The 2011 census tells us that, at that time, 37.8% of households were owner-occupied, and 28.4% were privately rented. Subsequent data suggests that the rental figure has ballooned considerably since 2011, whilst owner-occupancies have decreased. Council and social housing made for 13.5% and 18.1% respectively. Just over 30% resided in terraced properties, though this figure has since decreased.
Data from the Office for National Statistics shows Manchester to have the greatest percentage point increase in proportion of flats sold between Q4 of 1995 to Q2 of 2015. Flats sold in the city have risen from 10.1% in 1995 to 35.6% of all property sales in 2015. This equates to a 25.6% increase.
Looking at the number of properties on the market at present, compared to 2015, we can see that there has been a significant drop-off. There are 27% fewer properties of all types on the market in July 2016 than there were this time last year. Nonetheless, in keeping with the data from the Office for National Statistics, the highest proportion continue to be flats, with 1471 up for sale in July 2016. This equates to 19% fewer than last year.
Of course, where there are fewer properties on the market, demand is high on those that are for sale. From our information, in the period May to July 2016, it seems terraced houses, and one bedroom properties, take the least amount of time to sell. Interestingly, however, when we look at value, it’s the £400,000 to £500,000 bracket that is snatched up quickest.
The Rental Market
When we look at July 2016’s data on the rental market in Manchester, we see that the most popular properties for rent are in the two bedroom category. They fly off the market within an average of 51 days, and there are nearly 2000 on the market at time of writing. Tenant occupancy rates in Manchester are at over 97%.
Why so popular? Well, there are a number of factors at play making rental the primary accommodation option for residents in Manchester. Firstly, the lack of lending for mortgages, and a decline in social housing. Then there is the shifting employment landscape and continuing immigration. Divorce rates are higher than ever, and (completely unrelatedly, of course) people are delaying marriage for longer. Finally, there’s the rise in student numbers.
Demand for high quality, purpose-built student accommodation is higher than ever. Students, it seems, aren’t happy to fester in mould-encrusted digs anymore. We won’t mention anything about millennial entitlement issues here. But the result is that Manchester is providing property that meets the demands of the city’s valuable student population, and with over 80,000 students arriving every year, this is a lucrative market.
What’s more, a large number of students enjoy Manchester so much that they stay on after they’ve graduated, moving up to a house share or city centre apartment as they make the transition from study into the workplace.
In the city centre, in the rental market in particular, the highest demand can be found in those smart, European style open plan apartments and converted warehouses. Even more so, high quality micro-living apartments, and those boasting new techie smart home features. These are the sort of properties young professionals rising up through the economic ranks are after, and the city centre is where they want to make their home.
To Conclude: Should I Invest in Manchester?
Of course, we can’t tell you to invest anywhere. We cannot make assurances, and markets can always drop as much as they can grow. Having said that, however, all signs point to a glittering future for Manchester city centre.
Regeneration is reaching deep into every crevice of Manchester, with billions being invested in the continued growth of this city. Great minds are seeing the sheer potential Manchester has to offer, and for those savvy enough to jump on the right opportunities as they come up, there is a sense of the property market here being ripe for the picking.
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