Manchester and Birmingham growing strongly.
The UK property market as a whole has resisted the economic turmoil of Covid-19 well, emerging strongly from the pandemic and continuing to grow.
The latest index from the Office for National Statistics shows that the average UK house price grew by 9.6% over the course of 2021. Now, in the first quarter of 2022, we have seen reports from Rightmove, of the biggest monthly house price rises in 17 years, and a new average high of more than £345,000.
However, the most important thing for investors is the future – so where are the best locations for investments which balance higher entry prices now with the potential for the most growth down the line?
One of the best ways to predict the future prosperity of an investment location is to measure its rate of construction and development. This is a key market driver and an indicator that should be considered when looking at where to make your next investment.
We have picked out two of the best places to invest in UK property here by looking at their construction activity in different sectors.
Manchester is an interesting case for property investors because its success is known and understood, yet there is still plenty of room for growth and a huge amount of construction underway to deliver it.
The Deloitte Manchester Crane Survey 2022 shows that the last five full years have seen almost 20,000 new residential units delivered to the Manchester market, of which just over 5,500 were completed in 2021.
In addition, a further 10,700 units are in construction as of 2022, the majority of which are scheduled to finish in the next five years. This raises the question of whether the Manchester market is overcrowded, and therefore whether investors should be wary.
The main consideration here is population growth – or to put it another way, will those additional 10,000+ units be enough to meet demand. By looking at future projections, we can say that the answer is likely to be no. Manchester City Council estimates that Manchester’s population will grow by a further 70,000 people by the end of the decade, and all of those will need homes. In particular, luxury city centre homes are already in high demand and short supply, making them a good market for long-term investment.
Why are so many people moving to Manchester? The answer is the sheer number of high-quality jobs on offer combined with a first-class lifestyle. Returning to the Crane Survey shows the level of commercial building underway which is already translating into economic strength and employment opportunities.
More than 1.3m sqft of commercial space is under construction in Manchester right now, with almost 750,000 sqft of that due to be delivered in 2022. Crucially, more than half of the commercial space under construction is already pre-let, and it is hard to think of better evidence for a vibrant, attractive city centre economy than that.
More major schemes on the horizon will add to the total under construction in the future. These include Central Retail Park, Mayfield and more – significant regeneration schemes which are proving to be of interest to anchor tenants including the UK government, National Rail and several banks.
Add in the 1m sqft of science, educational and research space completed over the course of 2021, including the world-class Manchester Engineering Campus, and we have the picture of prosperity in Manchester.
A Deloitte spokesperson said: “Our latest results demonstrate that Manchester and Salford have been remarkably resilient during 2021 as the world entered its second year of the pandemic. Whilst there has certainly been some rebalancing of market activity over the last two years, overall construction levels are well above average for the city.
“There are also plenty of new opportunities, with restrictions beginning to wane and a healthy pipeline of new developments fuelled by a continued appetite for inward investment in the city.”
Want to invest in Manchester property? Learn more by clicking here.
Much like Manchester, Birmingham enjoys a strong reputation among property investors. The UK’s second city is a huge national success story, and 2022 could be its best year yet.
Hosting the 2022 Commonwealth Games will allow Birmingham to shine, demonstrate to the world its progression over the past decade and showcase some of its best developments.
The Deloitte Birmingham Crane Survey 2022 shows that the pace of development in the city has been relentless. The number of new residential schemes underway in Birmingham increased by 250% in the last year, with 14 new buildings breaking ground in that time.
Deloitte’s data shows that 4,720 units are currently under construction in Birmingham. This is a volume of development that could set new records in the city. This leads to similar concerns as those mentioned above in Manchester – does this mean that the market is about to become saturated and, therefore, should investors stay away from Birmingham for now?
By putting the numbers in context, we can see that investors should not be overly concerned with new record delivery statistics. Firstly, it should be noted that these unusually high future figures follow a year in 2021 where the volume of units delivered fell by 26%
This was due to supply chain issues, restricted availability of materials and labour shortages that all contributed to delays and hit Birmingham construction especially hard.
Secondly, much like Manchester, Birmingham’s population is growing at a rate that far outstrips the pace of construction scheduled for the future. The latest published figures from the Birmingham Demographic brief show that the city’s population is scheduled to reach more than 1.2m by 2038 – representing a growth of 7.8%.
This is powered by a commercial sector which the Deloitte Crane Survey shows the pace of delivery almost quadrupled in the space of a year. Along with the aforementioned Commonwealth Games and Birmingham’s student population which grew by approximately 1,500 in the last year according to the Crane Survey, you have a recipe for future growth.
A Deloitte spokesperson said: “This year’s Crane Survey shows that development in Birmingham city centre continues with major residential and office developments leading the way.”
Want to invest in Birmingham property? Learn more by clicking here.