Go back fifty years or so and the city centre property market wasn’t very big. Apart from London and some smaller, mainly historic cities hardly anybody wanted to live in a city centre. The popularity of moving out to the suburbs that started in the early 20th century had left many city (and town) centres with pretty much no residential market to speak of.
But the city centre property market has undergone a revival over the last couple of decades. Some city centres have seen a major repopulation, with many thousands of people moving back into city centres. There have been some major new city centre residential property developments. Cities like Birmingham, Manchester, Liverpool and Leeds have seen thousands of new city centre homes. Many smaller cities have their own city living markets too.
From almost nothing, city centre property has become a very important market for many investors, buyers and agents alike.
However it’s probably fair to say that the city centre market is at something of a turning point at the moment. So now might be a good time to consider where this market is going.
Let’s consider a few relevant factors in this market:
* City centres offer convenient living, close to shops and services as well as public transport. This is especially important today when commuting in to a city is increasingly expensive and time consuming.
However, city centres still have some limitations as a place to live. For example, school provision is not always great. This causes some city centre residents to move away once they have families.
* City centre property generally offers good value compared with the suburbs, especially the most popular residential suburbs in any city. Thanks to all the new developments supply is generally better too.
* City centres have become more popular for students in recent years and this has expanded the market. Some students have moved from HMOs in the traditional student suburbs and into PBSA which is mostly in city centres. The relocation of some university campuses has also contributed to this.
* Covid – and working from home. Covid caused more people to work from home where they could. If you work from home you no longer need to be in the city centre near your workplace.
Even although most people have returned to going into work now, working at least part time from home is an established trend that doesn’t seem to be going away.
* Covid – and the race for space. Covid caused more people to want more space at home, as well as properties with more space in rural areas or at the coast. Compact city centre apartments for example seemed to go out of fashion.
However, some reports suggest this trend is now reversing.
* Changing trends. City centre retail (as well as bricks and mortar retail generally) has declined in recent years. City centre leisure is now facing challenges too, due to the rise in the cost of living.
One major reason for living in a city centre might be to be close to shops, nightlife etc. But as these amenities decline it could mean the city centre exerts less of a pull than in the recent past.
* Many city centres have very strong, in fact increasing, demand for property to rent. This in many ways an important acid test that supports the city centre market. It seems that plenty of people actually want or need to live in city centres still.
* Many city centres continue to offer strong yields for buy to let landlords. Purchase prices are often lower than popular suburbs while achievable rents can be higher. City centres could be a part of the buy to ley market that still offers viable yields while other areas struggle. They could offer something of a haven for investors.
Renting has always been the more popular option compared to buying for city centre residents anyway, while renting in the suburbs was traditionally quite rare.
* Build to rent or BTR will most likely be a factor going forward. Build to rent developments are increasing in numbers with many large developers and corporate investors keen to expand their involvement. Build to rent developments are mainly in city centres which to some extent will keep city centre resident numbers up.
In summary, after hitting some problems during Covid, the city centre property market seems to have weathered the storm well and prospects for the future look fairly positive. However the city centre property market is a relatively new sector of the market and unlike the suburban market is by no means mature. Potentially it is very sensitive to the future of the economy and to changing living and working trends too – more so than other sectors of the property market.
Owners, investors and agents who are involved in the city centre property market would be well advised to keep an eye on supply and demand together with price and rent trends.