Cardiff is on the cusp of becoming the UK’s next major Build to Rent housing hub, following in the footsteps of London and Manchester – but only if residential developers deliver the mix of tenures and property needed, according to a new report from Knight Frank.
The property consultancy’s annual Cardiff Report highlights office and residential development trends in the city. Its latest report released this month showed that while the proportion of households renting privately climbed from 22% in 2001 to more than 60% by 2017, none of it so far had been in the kind of purpose-built, professionally managed stock – known as Built To Rent (BTR) – that had proved so successful in London, Manchester and Birmingham.
Leah Mullin, Knight Frank’s Cardiff Head of Residential Development team, said:
“The local population is already increasingly living in private rented accommodation, particularly in the city centre, where average PRS household incomes are highest. In order to meet the ongoing demand, now is the time to more fully embrace BTR in the city centre, a trend which we are seeing throughout the UK.”
The report showed that prime asking rents in the city centre, defined as the top 25 per cent of the market by price, has risen to £1,050 per month during the third quarter of 2018, according to data from Rightmove, up from £875 during the same quarter in 2015.
Leah Mullin added: “Cardiff is a rapidly expanding city, with a growing reputation as a great place to live and work. But if it is to retain the talent pool generated from Cardiff’s three universities and attract new inward investors and occupiers, it needs to deliver more vibrant, amenity-rich, flexible living space.
“There are more than 50,000 higher education students in Cardiff, and new Knight Frank research indicates 40 per cent of those that qualify in Cardiff plan to stay – that rates in the top five when compared with rival cities.”
According to the report, younger workers were taking advantage of the increased flexibility of renting as a tenure which allowed moving between locations without any of the costs associated with buying or selling a property, and the BTR sector was undergoing stellar growth as a result. The size of the UK market was estimated to climb from £25bn in 2017 to £70bn by 2022.
Leah Mullin said: “There are early signs the residential market is beginning to respond to the opportunities offered from this dynamic city, which is driving both land and house values. A high quality pipeline is beginning to emerge at a critical time, which will be vital in supporting continued growth in the local economy and population.
“Developers have earmarked Cardiff as a new area for growth. So far, detailed plans have been granted for one BTR project totalling 206 units on the former Browning Jones and Morris site, planning has been granted for 305 units at The Interchange at Central Square and IM Properties have submitted an application for 307 apartments at Capital Quarter. Plans are being drawn up for a further six schemes likely to be partial or entirely BTR, which if approved could deliver more than 3,000 new homes over the coming decade.
“Those projects need to be delivered to meet the demand from the ever-expanding commercial market.”
Knight Frank’s Cardiff Report claimed that the outlook for Cardiff’s economy, connectivity and demographics supported the case for a growth in the BTR sector. Cardiff’s population and economy growth was projected to outpace all other major UK cities over the next decade, according to Experian. In addition the Growth in Gross Value Added, a measure of economic growth, was projected to outpace all other major cities, other than London.
Growth in jobs was also set to be robust, particularly in the professional services and public services sectors, where 14,000 jobs were forecast to be added over the next decade.
Infrastructure work was well advanced to electrify the rail line between London and Cardiff, a journey that would take as little as two hours, and four new stations were being added to the South Wales Metro during the next decade in order to support the city’s expansion.
“The city certainly has the demographics and economic prospects to support the concept,” said Leah Mullin. “We’re already seeing strong interest from domestic and foreign funds to acquire stable assets.”