Liverpool - A Pool of Life

Liverpool emerges as a smart investment alternative to London, and proves there’s far more to the city than The Beatles.

Allegedly once referred to as the “pool of life” by pioneering psychoanalyst Carl Jung, Liverpool has certainly carved out a colourful history for itself.

The city is well-known for its bustling port and cutting-edge shipbuilding industry (Liverpool was the headquarters for both the Cunard and White Star lines) and, sadly, played a crucial role in the American slave trade in the early 19th century, which ironically gave rise to the UK’s oldest black community in addition to hosting Europe’s oldest Chinese community.

Liverpool was among the wealthiest cities in Britain in the 1800s, and among its most progressive come the industrial revolution.

The first overseas American consulate was there; it was home to the first doctor to link sugar and diabetes; and opened the UK’s first public art gallery. The city on the Mersey River is now home to more than two million Liverpudlians and counting, and is basking in the glow of investor interest in the wake of massive urban renewal.

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Liverpool took advantage of its shipbuilding heritage by pivoting the city’s regeneration on the landmark UNESCO-listed Albert Dock (now a hub of museums, hotels and dining) and the Three Graces – the Royal Liver Building, the Cunard Building and the Port of Liverpool Building, now housing offices.

The landmarks loom over the city from the waterfront, as tech, finance and renewable energy industries move in and draw students and labour from around the world.

“It’s night and day what’s gone on there,” notes Jonathan Gordon, distribution director at Hong Kong investment advisory IP Global.

“It’s a classic regeneration story.”

Like its second-tier peers in Manchester, Birmingham and Leeds, Liverpool is attracting attention for its affordability and potential for growth.

“The central London ship has sailed for the time being. It reached its peak around 18 months or two years ago, and at that point there was absolutely no price sensitivity,” Gordon says.

“People are now starting to push back, and prime central London has slowed down because asset prices are too high, transaction costs are too high, and Brexit uncertainty has slowed capital from abroad.”

Adam Challis, head of residential research for JLL, agrees. Citing greater transaction costs in many international investment locations, he argues London is relatively reasonable.

But within the context of the UK, “There are absolutely out performers,” he says.

“In some respects locations such as Manchester, Edinburgh and Leeds have not been exposed to the restraint of the last cycle. There are micro-markets seeing a strong demand surge with very little supply in response, and as a result, there’s been a positive impact on capital growth.”

You can include Liverpool on that list. The city’s quartet of major universities and diversifying economy (advanced manufacturing and shipping, creative industries and medical), which is attracting both employers and staff, are spurring its population boom (projected to be 1.4 million in the city by 2040), 16% projected price growth to 2021, UK-best 4.5% capital growth rates and rental yields averaging 7%.

As one arm of the northern powerhouse, Liverpool can also expect to take advantage of the massive infrastructure development in the pipeline; London will be just 90 minutes away once HS2 is complete. Above all, prices are still below their 2007 peak.

“If you look at the cost of employment in London – factoring in what you have pay someone and the premises – it’s 20% to 30% less in [Liverpool],” Gordon says.

“Combine that with a very, very healthy student population, who are looking for jobs, you get a much higher retention rate because more jobs are being created locally to capture that resource. It’s a brain gain rather than a brain drain.”

For investors looking for alternatives to pricey London, Liverpool makes a good case for itself at a time when stamp duties can play a major part in purchasing decisions and yields in London can be moderate at best.

The latest addition to the Liverpool skyline is The Levels in the waterfront Tower Building. Located inside a Grade II-listed building, The Levels is a regeneration and office conversion (by developer RBH) for a total of 80 one and two-bedroom units situated minutes from Lime Street rail station, the Graces, the CBD and chic retail, dining and leisure precincts.

The flats, ranging in size from 631 to 1,244 square feet, will ultimately have a modernised art deco vibe, and will be outfitted with integrated appliances, halogen and downlighting, herringbone LVT or beech flooring in spacious, open concept layouts.

Gordon cites a growing number of investors from Singapore and the Middle East as evidence of the city’s rising profile, adding that local UK buyer numbers are also up, with more and more recognising the strength of the domestic market.

Simple economics are driving students and young professionals to affordable locations such as Liverpool, creating a degree of demand Gordon doesn’t foresee dipping any time soon; IPG projects yields at The Levels will be in the neighbourhood of 6%.

“In more affordable areas where normal people with normal salaries can afford to live … the market has never been stronger. People are moving to where they can afford to live. Many of the northern cities are now punching above their weight.”

The Levels is scheduled for completion in early 2018 and prices begin at £180,000 (HK$1.75 million).