With a Government planning policy that encouraged high density development close to city centres and transport hubs, builders focused on erecting high-rise schemes to achieve volume targets. This led to the supply of city centre flats far outstripping demand, with some units eventually selling at 60 per cent of their original prices.
Seven years later values across most of the city are still not back to where they were before the crash. But one place where prices have recovered to the pre-crisis peak in 2008 is Leeds city centre.
Research by Leeds city living specialist Morgans show that home values in the heart of the city, particularly at the upper end of the market, are rising due to a neartotal halt to housebuilding and a sharp rise in the number of people living in the city.
We are selling high-quality properties in core locations, for the same prices as we achieved at the peak of the market in 2008. Jonathan Morgan, Morgans
“We are selling high quality properties, in core locations, for the same prices that we achieved at the peak of the market in 2008, with interest from both investors and owner-occupiers,” said Jonathan Morgan, Managing Director of Morgans.
According to the Centre for Cities think tank, the population in Leeds city centre more than doubled between 2001 and 2011, from 12,265 to 26,020. But while demand has grown, a major lack of development in recent years has resulted in a housing shortage in the heart of the city and surrounding areas, pushing prices out of reach for many people in Leeds.
The National Housing Federation reports that the average price of a home in Leeds last year increased to £178,516 on the back of the supply-demand imbalance which is over seven times higher than the mean annual earnings for the city of £25,054.
Based on the data, the average Yorkshire worker would need a 62 per cent pay rise to £40,721 a year to be in with the chance of getting a typical mortgage in Leeds.
With the volume of households in the city expected to grow, the housing shortfall is likely to get worse. But thankfully with market conditions in Leeds picking up, there is now “a raft of new developments on the horizon,” according to Morgan.
“Forward thinking developers recognise the importance of quality so there’s some real thought going into the latest generation of schemes which is good for the market and Leeds as a whole.”
IN THE PIPELINE
Keepmoat Homes is one developer planning to build more properties in Leeds city centre in 2016. “Our research and intelligence identifies the property market in Leeds is not only strong but there is vast demand for new homes,” said Ian Hoad, Keepmoat’s Operations Director in Yorkshire,. “We’re excited about developments we have in the pipeline.”
Carillion has submitted a planning application for the £80 million revival of the Tower Works site in Holbeck, which will include homes, commercial and leisure facilities, as part of one of the biggest regeneration projects in Leeds. Construction starts in spring 2016.
Our research and intelligence tells us that there is vast demand for new homes. We are very excited about developments we have in the pipeline. Ian Hoad, Keepmoat Homes
Gareth Jackson, Development Director at Carillion, believes Holbeck is emerging as the “most exciting place to live and work” in Leeds, while Councillor Richard Lewis claims the Tower Works development could enhance existing plans for Holbeck Urban Village and the wider South Bank area, acting as “a catalyst for further regeneration.”
As Leeds continues to build on its ever-growing reputation, exciting investment opportunities are arising across the city and it is not just UK housebuilders that are taking note.
Following Chancellor George Osborne’s trade visit to China last September to boost funding for a ‘Northern Powerhouse’, large-scale Chinese investment has been secured for various projects in northern England, including South Bank in Leeds: a new city centre regeneration scheme covering over 130 hectares.
Chinese money will help support various projects, including the development of a new super-fast train route connecting Leeds to Manchester, dubbed HS3, along with further rail, road and air transport facilities in the region, which should boost its international activeness, not to mention create thousands of new homes and jobs.
“The economy is striving in the north and the Northern Powerhouse effect is really taking place,” said Martin Robinson, Director of Sales at Hunters.
“A shortage of stock has undoubtedly pushed prices up as we’re currently seeing more people wanting to move than stock available,” he added.
Judith Blake, Leader of Leeds City Council, has welcomed the international investment and said she hoped additional investment from China would follow as a result of the Chancellor’s trade delegation.
“Bringing investment into our major regeneration and transport schemes across the north will deliver a long overdue boost to the economy providing many much needed job opportunities.”
The rise in property prices in and around Leeds city centre is supported by better employment prospects in the area. The financial and services sector in Leeds, worth over £2.billion, is one of the largest in the UK, which in turn has helped to attract fresh talent and investment to the area, generating additional demand for property in the process.
“The jobs market is a key driver for all regional property markets and its influence must not be underestimated,” said Asa Bentley, Managing Director of online estate agent Makeurmove.
Makeurmove has earmarked Leeds as a ‘buy’ status to their landlords as it is one of only three cities in the UK to have more private sector jobs than the national average, with the other two being London and Manchester.
“Much has been said about the Northern Powerhouse that is Manchester’s rise from its industrial ashes but the same is soon to be said, if not already, of Leeds,” Bentley added. “A decline in manufacturing jobs shifting towards the financial services industry, the proposed HS2 and the expected population increase of almost 10 per cent over the next five years appears to support demand continuing to outstrip supply of quality city centre stock.”
Many residential property investors have in the past overlooked Leeds in favour of investing in other parts of the UK, but Jonathan Stephens, Managing Director of Surrenden Invest, claims that many are now “waking up to the potential offered by this flourishing region.”
With the private rented sector in Leeds going from strength to strength, investors are now entering this market, Jonathan added, “The growth potential for domestic and international buy-to-let investors is huge: Leeds is on track to become one of the UK’s strongest regions and is certainly one to watch in the near future.”
Grainger, Britain’s largest listed residential landlord, recently acquired a £10.4 million portfolio of rented properties, made up primarily of homes in Leeds, which appears to be representative of its confidence in the Leeds market.
Kurt Mueller, of Grainger, said, “After a few years investing in London and the South East we are beginning to turn our attention again to the regions as the economic recovery takes hold and investment prospects improve.”
Linley & Simpson lettings agency, with 11 offices across West and North Yorkshire, spearheaded by three in Leeds, recently posted the busiest month in its 18-year history, having secured 401 lets, a further indication that the rental market in Leeds and Yorkshire is thriving.
“The resurgence of Buy to let has been a dominant theme throughout 2015,” said Nick Simpson, Director of Linley & Simpson. “Yorkshire very much remains in the throes of a rental boom.”
While central Leeds has recovered, regional disparities in the city’s housing market have widened, with the gap widening between prices in core areas and those in fringe schemes. Values per square foot can differ by up to 50 per cent on apartments in premium developments in central locations and those on the outskirts.
The rise in the student population – 60,000 now live in purpose built flats in the city centre, for instance, has led to a mass exodus of students from their traditional Leeds heartlands, in areas like Hyde Park, Headingley and Kirkstall, resulting in a major surplus of student bed spaces and empty properties in these periphery areas, pushing down house prices.
But with residential property prices in the city centre rising, the biggest growth in terms of households moving forward is likely to return to markets on the outskirts, especially those undergoing a major overhaul and where prices appear to represent good value for money.
The primary questions are, which area will be the biggest beneficiaries of price growth rippling out from central Leeds and which agents will be there to reap the rewards?
Keepmoat Homes www.keepmoat.com
Linley & Simpson www.linleyandsimpson.co.uk
Surrenden Invest www.surrendeninvest.com
Leeds City Council www.leeds.gov.uk