New analysis of the Liverpool city centre residential market by City Residential reveals that while rents continue to rise the market for apartment sales has ‘hit a brick wall’. Tony McDonough reports
Sales of apartments in Liverpool city centre have “hit a brick wall” amid rising interest rates and surging inflation.
However, the latest quarterly analysis by City Residential shows that constrained supply and soaring demand is seeing city centre rents continue to rise. City Residential managing director Alan Bevan sees little sign of this slowing.
Alan adds that the “disastrous” mini budget late last year was a major factor in the slowdown of the residential sales market. Delivered by then Prime Minister and Chancellor Liz Truss and Kwasi Kwarteng the budget spooked the financial markets.
Inflation had already been rising due to the war in Ukraine and rising energy costs. The mini budget led to a rise in interest rates and lenders withdrawing multiple mortgage products from the market.
“The sales market hit a brick wall towards the end of September 2022,” said Alan. “The initial impact was a loss of ongoing sales as buyers balked at the huge spike in mortgage rates and their serious concern as to the likely future direction of house prices.
“While the market has settled down since then and been helped by mortgage rates falling back a bit, the ongoing uncertainty is continuing to impact the market. Both buyers and sellers are sitting on their hands waiting to see what happens in early 2023.”
However, with signs that both inflation and mortgage rates may have peaked, Alan is cautiously optimistic the market may start to come back later in 2023 and into 2024.
He added: “While the sales market in Liverpool city centre has had a very difficult few months some of the fundamentals of the market continue to hold firm.
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“Properties continue to look extremely good value in comparison to the suburbs/other cities and strong rental growth will increase yields (especially if prices fall), thereby attracting investors and landlords.
“While it is too early to say we are over the worst, there is definitely room for some cautious optimism that the fundamentals of the market will begin to encourage buyers to return in 2023.”
On the rental side of the market, Alan believes the lack of supply will continue to see rents rising steadily in 2023, albeit at a slow pace at the top end of the market (£1,000 per calendar month and above).
He explained: “The rental market continues to surge with rents rising at a strong and steady rate with no immediate sign that this growth is starting to slow.
“A slowdown in supply and a massive increase in demand (as the city has recovered strongly over the last two years) has been the main driver of the growth.
“With current vacant supply/void periods at an all-time low, new immediate supply constrained and increasing demand it is difficult to see a scenario where rents start to falter/fall.
“A potential recession and continued high energy costs may well impact the market but currently we expect these factors to slowly reduce the rate of rental growth at worst.
“Looking forward to 2024 and beyond we can potentially see a scenario where lower selling prices, increased supply and a tougher economic climate will impact rents more than they will in 2023.”