Just why is Manchester so popular for property investment right now?

Just why is Manchester so popular for property investment right now?.

Just why is Manchester so popular for property investment right now?.

November 23, 2021
10-reasons-to-invest-in-manchester

Manchester has been the UK’s number one property hotspot for many years, but its popularity among property investors has gone through the roof over the last 12 months in particular. The Covid-19 pandemic threatened to slow down the UK investment market, but Manchester led the way and went from strength to strength instead, defying expectations.

Here’s why you should be looking to buy property in Manchester

Unprecedented rental demand

Manchester city centre is seeing higher rental demand than ever before. Passive rental income is the basis of any property portfolio, and investors should look no further than investment property in Manchester to find fast-growing and reliable rents.

Reports from Zoopla in November 2021 show that rents across the country are rising at their fastest rate in 13 years – and nowhere is that truer than in Manchester. Tenant demand in the city is growing at unprecedented levels, with Rightmove recording a 36% increase year-on-year to September 2021 in its latest Rental Tracker. This incredible growth is reflected in stock levels across the city.

Research from urbanbubble in Q3 2021 shows that fewer than 500 rental homes were available across Manchester, despite 9,200 new homes being completed since the beginning of 2020. This is the lowest number on record and reflects the demand that Manchester is seeing. Not even the pre-pandemic market – when it was widely agreed that Manchester was reaching a new peak – could compete with the current situation.

The research from urbanbubble goes on to confirm that rents for studios, two- and three-bedroom apartments are at record highs, and average rents for one-bedroom apartments are following close behind. In contrast to last summer when tenants were spoilt for choice, this is a landlord-friendly market where rents across certain types of apartments have increased by 6% in the last quarter alone due to the overwhelming tenant demand and low competition rates for new homes.

What’s more, the latest UK Residential Forecast report from JLL shows that rents in Manchester are set to increase by more than 15% in the five years to 2026. This is significantly more than the national average, and it would be no surprise to see that turn out to be a conservative estimate if the market continues its trend of outperforming expectations in the years to come.

Strong house price growth

The same JLL report also showcases the strength of house price growth in Manchester. Whereas the national average house price is predicted to increase by 21.6% over the next five years, those in Manchester are anticipated to go up by 25.8% over the same period.

This is on top of the 8.7% increase in house prices that Manchester has seen in the last 12 months, as per figures in the most recent Hometrack UK Cities Index. This compares favourably to the UK average growth of 6.1% over the same period, and the Index states that “demand looks set to end the year more strongly than last year and we expect this to carry into 2022.”

JLL cites the lack of available homes in Manchester as the main factor in this strong growth – and that is something which is unlikely to change in the near future. Whereas Manchester’s population is expected to grow by 70,000 over the next five years, nowhere near that many homes are being completed. The Deloitte Manchester Crane Survey 2021 estimates that only 12,000 homes are scheduled to be completed in the city by 2025. Even with additional planning permissions being granted in the future, this leaves a shortfall of tens of thousands of properties – reinforcing the demand and competition that has will lead to substantial growth in the coming years.

A booming economy and office sector

Manchester’s story in recent years has been one of incredible economic success which has put it second only to London in the UK. The city centre economy alone is forecast to be worth more than £6bn annually by 2025, and overall the city is growing significantly faster than the UK average. Oxford Economics predicts economic growth of 16.4% by the middle of the decade.

This is being driven by a huge drive to create world-class office space in the city. The aforementioned urbanbubble quarterly report shows that almost 3 million sqft of new office space has been submitted for planning permission since the beginning of 2020, which is a record high.

Take-up of office space has been equally strong so far over 2021. The latest reports from the Manchester Office Agents Forum show that total take-up by the end of the year is likely to exceed 1 million sqft in the city and that take-up over the last quarter has increased by as much as 17%.

“An almost 17% rise in just one quarter highlights the fact that the Manchester office market is back with a vengeance”, said Steve Brittle, partner at Matthews & Goodman.

“Manchester is one of the most active commercial centres in the country, we think this trend will continue.”

Major transactions of note during Q3 2021 include:

  • Cloud Imperium Games taking 87,130 sq ft at Allied London’s Manchester Goods Yard
  • Deliveroo committing to 10,002 sq ft at 5 New York Street
  • Accenture taking 25,000 sq ft at Bruntwood’s Sci Tech’s Circle Square scheme on Oxford Road

This level of economic activity is important for Manchester and helps to explain why so many people are moving to the city. Before the Covid-19 pandemic, Manchester managed to attract some of the world’s leading technology and communication companies including Amazon, Google, Microsoft and the BBC. Now, it is clear that wasn’t a one-off, and the city is attracting the next wave of emerging giants, as well as developing its capacity to produce more homegrown “unicorns” like The Hut Group.

This means that Manchester can offer top tier employment prospects to the most promising young professionals and graduates – drawing people to the city from across the UK and the world, continuing the cycle that creates demand and competition in the housing market.

This is an excellent time to invest in Manchester, and those looking for the best investment areas in the city would be advised to look at city centre areas close to established or emerging business districts. These include MediaCityUK, Castlefield, the Northern Gateway area and the emerging skyscraper district among others.

For more information about investing in Manchester property, get in touch with our team today by clicking here.

Author

Sanjit Dhanjal.

sanjit@opulentinvest.com