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PROPERTY INVESTMENT

Manchester

On Location

Welcome to Manchester

Located in the North West of England, Manchester is one of the UK’s most-loved and globally recognised cities.

Famous for its two world-class football teams, iconic music stars and its industrial roots, Manchester was ranked third in the 2021 Time Out’s best cities in the world based on its friendliness, resilience and nightlife.

Named the Most Liveable City in the UK by The Economist in 2019, Manchester has 45,391 residents, while Greater Manchester is home to around 2.7 million people. Projections from the Office for National Statistics suggest that the City’s population will increase to 631,500 residents by 2041. Over the next decade, 110,000 new jobs are expected to be created, with residents’ disposable income rising by 28%.

For property investors, buy to let property in Manchester and the wider North West region have seen housing prices and yields accelerating significantly faster than the UK average, offering buyers the potential for making a significant return on investment and a steady rental income.

Manchester Property market overview

£bn+
AT THE HEART OF THE NORTHERN POWERHOUSE AND UNDERGOING MULTIBILLION POUND REGENERATION.
149%
MANCHESTER’S POPULATION HAS INCREASED BY 149% BETWEEN 2002 AND 2015
40.0%
40% OF MANCHESTER’S POPULATION IS AGED BETWEEN 15 AND 34.
105,000
105,000 STUDENTS AT 5 UNIVERSITIES ACROSS THE CITY.
50.0%
HOUSE PRICES HAVE INCREASED BY ALMOST 50% OVER THE LAST 10 YEARS .
28.00%
28% HOUSE PRICE GROWTH FORECAST IN THE NORTHWEST BETWEEN 2021 AND 2025.
17.1%
17.1% MANCHESTER SALES PRICE GROWTH FORECAST (CUMULATIVE, NEXT 5 YEARS)
16.5%
16.5% MANCHESTER RENTAL GROWTH FORECAST (CUMULATIVE, NEXT 5 YEARS)

Manchester property values and yields

The strong current performance of property in Manchester has allowed the market to blossom into a richly varied entity.

In recent years, the practice from investors was to buy prime central apartments and off-plan residences to benefit from capital gains alone. However, the market is now so strong across the board it has witnessed a rare phenomenon where capital values and rental yields have climbed at a similar pace, meaning holding onto assets over a longer-term offers investors a significantly higher return on investment.

RISING RENTAL VALUES

One of the most notable takeaways from JLL’s 2020 Northern England Forecasts is that Manchester property investments will see both sales price growth and rental yield growth climb at a markedly similar rate over the next five years. Investors entering the market with a long-term view will benefit from rising values and rent. When compared to the wider region and the national average, Manchester continues to set itself apart from the UK’s property market.

17.1%

SALES PRICE GROWTH FORECAST (CUMULATIVE, NEXT 5 YEARS)

16.5%

RENTAL GROWTH FORECAST (CUMULATIVE, NEXT 5 YEARS)

Source: JLL 2020 Northern England Forecasts.

What’s more, despite the challenges caused by the pandemic, the cost of rental property in Manchester increased by 1.4% in the last three months alone (Zoopla).

With a resurgence in demand following cities opening back up, university students starting a new academic year, and offices and businesses opening up across the city, there is plenty of scope for rental values to climb at a faster pace in 2022.

RISING PROPERTY VALUES

For many years, Manchester has been regarded as one of the UK’s best performing property markets and has emerged as a safe choice for those looking to achieve capital gains.

The value of property in the City is expected to climb rapidly over the next five years due to heightened demand and the availability of higher-quality stock. Most UK cities have been unable to keep up the pace in terms of both capital growth and potential for the future, which presents a range of advantages for investors.

Average property values have climbed by almost 50% over the last 10 years and with prices in the city set to rise by 17.1% (5-year cumulative), there remains plenty of room for growth.

The question is now how to find the best value on the market to secure the highest return on investment.

5-year forecast

Strong market conditions and a continued demand from tenants has led to a resoundingly positive 5-year forecast, with experts within the industry agreeing that the value of property in Manchester is set to climb.

JLL’s report has earmarked Manchester as the location that will see the highest sales price and rental growth of any UK city over the next five years, despite the volume of new-build investments across the city.

This sentiment has been echoed by Savills who has pinpointed the wider North West region the area offering the best capital gains between 2021 and 2025. With the top end of forecasts fliting with 28% rises between 2021 and 2025 in the North West of England, it could mean every £100,000 of investment being worth £128,000 in less than half a decade.

Looking to the future, buy to let property in Manchester offers investors plenty of potential in the years to come.

MANCHESTER
%PA202120222023202420255 YEARS TO 2025
NORTH WEST10.5%4.5%4%3.5%3%28%
NORTH WEST9.0%3.5%3%2.5%2%21.1%
LONDON7.0%2%1.5%1%0.5%12.4%

Source: Savills, Mainstream Residential Property Forecasts, July 2021

What’s driving Manchester’s rental growth?

Historically, the UK’s Private Rental Sector (PRS) was seen as a transitional market that people enter before buying a home. However, the rising cost of buying and the availability of higher quality rental stock has seen the popularity of the PRS soar.

Rental property in Manchester has witnessed significant growth over the last 10 years, with two-thirds of the city centre population now classed as private renters (JLL). Considering 40% of the city’s population is aged between 15 and 34, investors are in a prime position to capitalise on the demand for rental properties, which predominantly comes from young  professionals, new graduates, and students.

This large pool of affluent renters does not only include aspiring homeowners. Many renters are not ready to commit to a permanent future in the city, which has created a demand for fully furnished rental properties that offer excellent transport links to and around the city. And it’s not just the city centre that has witnessed a rise in demand for rental property. Improved tram links and road and cycling connectivity have allowed city centre workers, who want to escape higher rental costs and the hustle and bustle of city-centre living, to sprawl outwards into the suburbs.

This trend in city workers moving outside of the M1 postcode has seen property markets in selected suburbs perform particularly well for rental and capital growth. What’s more, investors who broaden their search to include the wider Greater Manchester region are often rewarded with lower entry-level purchases.

For investors and developers, it is easy to see where the demand for rental property lies. New-build developments offering contemporary living spaces and easy access to the city’s transport links will naturally appeal to the city’s renters.

Best buy to let areas in Manchester

A recent area has sprung up as a critical financial district as part of the programme to enhance Manchester’s position in the global market. Spinningfields features offices, shops, restaurants and hotels, plus the project involved the creation of new homes, civic and public spaces, with pedestrian walkways, squares and parks.

A chilled-out area located on the Bridgewater Canal offers riverside living on the edge of the City. Here there is a mix of conversions, older developments and new builds. The area boasts a rich history and is built around the canals and viaducts – it is on par with Ancoats and Northern Quarter as the hippest place to live.

Considered the most exclusive part of town, Deansgate features many prestigious developments in residential terms, and it’s become a highly sought-after location with footballers, designers, and executives. In addition, the area has a notable number of boutiques, restaurants and bars, as well as the cosmopolitan vibe from the creation of the Triangle and nearby Printworks.

The Northern Quarter is the ‘alternative’ area, with many galleries, craft centres, health food shops and organic cafes. It has a welcoming atmosphere and is home to the local markets for the best fresh produce. As the home to Manchester’s textile industry, street art and sculptures are fantastic in this corner of the city. The trend is towards conversions for the residential sector, and new build worked into existing structures.

Ancoats is located behind the Northern Quarter and the City Centre and is easy to commute into the heart of Manchester. Those living in the area can walk to Piccadilly Station in just 10 minutes. There are numerous restaurants, cafes, and bars in Ancoats, which means it is a popular area for young people to live in.

The city of Salford is one of the most popular regions for first-time buyers in Greater Manchester. Located 15 minutes by Tram from Manchester’ city centre, this well-connected City is undergoing extensive amounts of regeneration with projects such as Port Salford, Greengate Square, and the transformation of Pendleton.

These two areas have been at the forefront of property investment in Greater Manchester and have emerged as a prominent employment hub. Home to international companies including BBC, BUPA, ITV, and Kellogg’s, demand for a rental property in this area continues to rise. This commercial and residential district of Salford is based around the old Manchester Docks. It is famously home to the Lowry Theatre, Imperial War Museum, and the ITV Coronation Street set.

In 2020, Eccles was named the UK’s top-performing market, recording a 16% rise in property throughout, according to Rightmove. The affordability of property in the area has caught the attention of young professionals who have been impressed with the town’s excellent transport links into Manchester and the wider region. In addition, its proximity to major employment hubs, including Salford and quick access to the University of Salford makes it an excellent choice for those working in the area.

Made famous as the location of Manchester United Football Club and Emirates Old Trafford Cricket Ground, Trafford is undergoing significant regeneration along Talbot Road, with plans underway to create the new Civic Quarter with an initial £1 billion investment. Trafford is more than just an area associated with sports for its residents. It has excellent schools, four rather unique town centres, and superb restaurants and leisure opportunities, making Trafford a much sought-after place to live.

Located seven miles south-east of Manchester city centre, Stockport is one of the largest towns in the Greater Manchester region. It is quickly emerging as a property hotspot in its own right. It offers excellent value and capital growth potential and was ranked Greater Manchester’s second best-performing postcode last year.

With the town undergoing a £1 billion transformation that will include major transport improvements, the overhaul of the town centre, plus the expansion of the Stockport Exchange, there are plenty of reasons why Stockport can rival Manchester in terms of growth potential.

Manchester has an array of affluent villages, all within striking distance of the City Centre. These include Altrincham, Chorlton, Didsbury and Rusholme. When considering the best buy to let areas in Manchester, investors should always consider the type of renter who will live in the property and whether its location, price and the amenities on offer will make your rental property a good choice for tenants.

Why invest in Manchester?

Over the last 15 years, Manchester’s property market has consistently claimed the top spot as the best-performing location for rental yields and house price growth, helping the city emerge as a popular choice for property investors.

During this period, Manchester’s skyline has been littered with cranes and towering new-builds, with investors and developers fighting for the chance to accommodate the city’s rising population (149% increase between 2002 and 2015).

Yet despite an influx of investment in Private Rental Sector (PRS) developments and the average delivery of 1,150 new properties per year over the past 10 years, twice this amount is needed per annum for the next 10 years to meet demand (JLL), making buy to let property in Manchester very viable option for investors.

Unlike London, where city workers are moving to commuter towns and cities in favour of greener spaces and cheaper living costs, Manchester has seen a steep rise in young people moving to the city to further their education or career.

Trendy and affordable, Manchester is now home to one of the UK’s youngest populations (average age is 33, lower than the UK average of 40) and continues to attract young workers who find living and working in London unaffordable.

Named the world’s ‘most transparent’ property market in the 2020 Global Real Estate Transparency Index, Manchester is firmly at the top of investors’ wish list. With multibillion-pound investment pledges by the government and billions of pounds of investment pouring into the city by institutional investors, the city is undergoing a radical transformation that offers investors the potential to benefit from exceptional long-term gains.

A prominent university city

Over the last 10 years, UK towns and cities with a large student population have emerged as some of the most profitable areas for buy to let investment. After London, Manchester is England’s most prominent university city and is home to some 105,000 students. With five universities across the Greater Manchester region (The University of Manchester, Manchester Metropolitan University, University of Salford, University of Bolton and University Academy 92), the evergreen nature of the student property market means that tens of thousands of new students enrol each year.

The city produces around 36,000 graduates per year and, after London, Manchester has the highest student retention rate, with 51% of students choosing to remain in the city after graduation. What’s more, 57% of students from Manchester who left to study elsewhere return to the city after graduating. Its ability to attract students and retain graduates contributes to the overall buoyancy of buy to let properties in Manchester. This trend will inevitably help underpin returns from rental properties in and around the city.

At the heart of the Northern Powerhouse

As the fastest-growing major city outside of London, Manchester is at the heart of the Northern Powerhouse and is a central cog in the region’s economy. According to the Northern Powerhouse Independent Economic Review, a more unified and higher-performing Northern economy could add over £97 billion to the UK economy and generate 850,000 new jobs by 2050.

Since the initiative began, Manchester has benefitted from improved connectivity and transport links, including the completion of the Second City Metrolink Crossing and the bus and cycling infrastructure that is now in place on the Oxford Road Corridor. Manchester has also witnessed continued investment in crucial regeneration schemes that have boosted the local economy across the Greater Manchester region.

During the Autumn 2021 Budget, Chancellor Rishi Sunak renewed his promise to “expand and enhance” the travel network in the North of England by pledging £1 billion in funding to improve Greater Manchester’s transport network, plus £710m for the Liverpool City Region. The Chancellor reaffirmed his commitment to the Northern Powerhouse by stating that his Budget will deliver “a stronger economy for the whole of the UK with the North West receiving support to drive business growth, boost the local economy and help working families with the cost of living”.

Spurred by the Northern Powerhouse, Manchester property investment naturally become a popular option for investors seeking regular rental yields and long-term capital growth.

Download your Manchester market essentials guide for 2022

Home to some of the UK’s best-performing buy to let postcodes, find out why there is plenty of room for growth in the City Centre and wider Greater Manchester region.

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