Real estate in Manchester has become a key component of investor portfolios over the past ten years as the city becomes more familiar to overseas investors and home values continue to exhibit consistent expansion.
In fact, property prices in Manchester have just hit an all-time high.
But the UK is currently in a state of economic flux. The pound has fallen. What does that all mean for investment in the much-vaunted city of Manchester? Is it still an optimum time to invest?
Manchester real estate's past performance
Investors now find the average property price across the city sits at £250,000. This is a figure that has increased by a solid £10,000 (5.5%) since we last produced an investor overview for Manchester just 6 months ago.
Manchester has experienced consistent double-digit growth over the past 7 to 8 years. This is unusual considering the period has included Brexit and the pandemic, and its subsequent lockdowns.
But the performance has an even more sustained history. Back in 1995, the average house price in the city was £42,871 and now, in 2022, it is £250,116. That’s a long-term capital increase of +500%.
As a city-wide average, that level of capital return is difficult to beat within the UK market – especially when you factor in the yields Manchester property is capable of producing too.
Investors have enjoyed yields averaging over 6% – and Manchester is consistently found at the summit of UK rental investment charts and research.
Manchester real estate's forecast
Newly published market reports reveal Manchester rents are now 23% higher than 12 months ago. This huge rise is one of the highest in the whole of the UK property market where the average rise was 11.8% – for context, private rents in London, where property asking prices are almost 3 times as expensive, rose 15.8%.
The figures detail how the average property in Manchester can command a rental charge of £1,127 – up from £900 last year. It means investors are enjoying the fastest rent rises since 2016.
Much of the increase can be attributed to the huge rise in demand, with more and more people wanting to live in Manchester. The city recently sped up the Economist’s Global Liveability Index, rising 26 places to be named the 28th most liveable city in the world. No other UK city recorded a higher spot in the influential Index. Furthermore, Manchester is now a more desirable place to live than Barcelona, Los Angeles, Perth and Milan.
How does this affect the short to mid-term forecasts for the city’s property market? Most estimates suggest the strong performance will continue:
- Manchester capital appreciation forecast to 2025: 23.5%
- Manchester rental growth forecast to 2025: 18.2%
The growth will be underpinned, and maybe inflated, by largescale government investment too. It was recently announced the Greater Manchester Combined Authority is expected to add an estimated £10.2 billion to the value of its property market via further regeneration projects. Previously it was found local regeneration of this kind boosts property values by an average of 3.6%.
We’ll assess the locations and investment facets that are pertinent shortly, but first, it’s important to understand the market dynamics that have underpinned Manchester’s status as the prime regional UK city to invest in
The Manchester landscape
Supply and demand fundamentals
In the UK, undersupply is systematic. Because of this, UK real estate as a whole is consistently viewed as an investment safe-haven and a useful portfolio hedge against the general market and equity volatility.
Manchester itself is experiencing a severe shortage. According to recent predictions, as many as 70,000 more people are set to relocate to Manchester over the next ten years, so the imbalance brought on by significant population increases in the city centre will only heighten. Given that the existing pipeline for the city centre barely exceeds 12,000 units, supply will once more fall short of demand, and it is anticipated that prices and rents would rise even more.
Manchester's young professional and student property market
Most investors who purchase in Manchester aim to capitalise on the city’s tenant market – transforming a good investment into a great investment. It is now widely known among the investment community that Manchester has the most rapidly expanding private rented sector in the UK with 60% more 25 to 29-year-olds than the UK average. This has led to the city consistently achieving higher yields than anywhere else in the UK. Yields currently average just over 5.5% – although investors who know the market well can achieve much higher yields.
Many investors target properties nearby or with strong transport links to the city centre as they are very attractive and popular with the young professionals in the city.
It’s a tenant market that is driven by a huge yearly influx of students, many of whom decide to stay and live in the city beyond their academic studies. In fact, Manchester is home to 2 of the UK’s 5 largest universities (plus a further 2), attracting more than 100,000 students every year.
Buying Manchester property in 2022/23
As the above supply and demand dynamics show, a structural undersupply in the Manchester property market already exists and as the city becomes an increasingly popular destination for young professionals and students, the supply gap may only heighten.
Many investors feel the UK housing market as a whole is sufficiently detached from wider macroeconomic turbulence (outside of the mortgage market), but the recent volatility may work in favour of overseas purchasers. Investors buying with dollar-based currencies have recently seen the real terms cost of Manchester property fall by around 12%.
This is because back in May 2022, the pound was at 1.30 against the US dollar by mid-October this had fallen to 1.14, effectively elevating the purchasing power of thousands of investors.
Where and what to buy in the Manchester property market
Like London, the Manchester property market is large and varied.
Investors can find significant variations in price, type and investment potential – but, on the whole, investors favour city centre apartments.
This is reflective of the large-scale gentrification that has transformed the city centre in recent years, making it a much more exciting, dynamic and popular place to live.
Furthermore, in a post-pandemic market, city centre apartments are currently undervalued across many major UK cities. Following the almost blanket work-from-home directive issued by the UK government as part of its Covid response, the UK property market embarked on the ‘race for space’. Larger detached suburban properties with gardens and enough room for a home office became very popular, while the asking price of smaller but extremely conveniently located city centre properties stagnated.
In Manchester, between 2020 and 2021, the average price of a detached house shot up from £350,000 to £550,000 while flat prices dropped from £220,000 to £180,000.
This trend has now ceased and both areas of the market are again seeing values rise – however, many investors still believe apartments and studios are undervalued by about 5%.
It is not too surprising that transactions have focused on 2 main locations within the wider Manchester area.
City centre Manchester apartments
The vast majority of the purchases are occurring in the city centre, and the vast majority of those are apartments.
Most investors are expecting a solid floor for both capital appreciation and rental growth over the short, medium and long term, no matter where they buy, such is the supply and demand imbalance, but there is no doubt some city centre locations are more sought after than others.
M1, Spinningfields and the emergent Greengate are all proving to be popular with investors.
The tenant market is willing to pay for an aspiring lifestyle and so the focus is on developments comprising high-quality facilities and amenities. The checklist should include concierge, high-grade private realm gardens and communal roof terraces, dried and chilled post rooms, fitness suites with pools, and media rooms.
Services that are popular among the tenant market are on-site maintenance, biometric and monitored entry and, of course, unrestricted high-speed broadband access throughout the property.
Media City
The £1 billion, 200-acre masterplan in neighbouring Salford is best known as the new headquarters of the BBC and other media and broadcasting businesses.
However, such is the scale of infrastructural investment at Media City and the subsequent volume of job creation, it is now a thriving residential hotspot, home to hundreds and thousands of media professionals, and indeed anyone who wants to take advantage of a waterfront lifestyle full of restaurants, stores, and transport facilities.
Asking prices tends to be slightly less expensive than city centre properties with investors seeing slower appreciation but equally high yields
Manchester real estate for sale
Chestertons are experts within the Manchester market, having sourced properties for select portfolio needs for investors from the UK and overseas.
We can help you acquire both prime city-centre developments and the pick of residential units in Media City. Please contact us if you require availability or further information regarding any real estate development in Manchester
Information sources: Home.co.uk / I Love Manchester / Alliance
