Property investment in Manchester

Here's what you need to know about property investment in Manchester

Over the past decade, property investment in Manchester has been a staple in investor portfolios, with real estate prices in the city going from strength to strength. 

In fact, property prices in Manchester hit an all-time high last year.

Investors now find the average property price across the city sits at £231,000. This is an average figure that has increased by a solid £14,000 (6%) over the course of 2021. As a city-wide average, that level of capital return is difficult to beat within the UK market.

Of course, there are variations across the Manchester market. The first thing to note is newly-built and off-plan properties average almost 10% more than the market average at £253,000. On the whole, this is reflective of the large-scale gentrification that has transformed the city centre in recent years. Lower quality stock has been demolished or renovated bringing newer, higher-spec apartments to the city centre market and its huge and buoyant rental supply. 

Nowhere is this more apparent than the M2 3–- postcode, where last year average sales surpassed the million-pound mark – 4 times the average across the region.

We’ll assess the locations that are attracting lots of investment demand shortly, but first, it’s important to understand the market dynamics that have underpinned Manchester’s status as the prime regional city to buy property in.

The landscape of investing in Manchester property

Few cities across the world have enjoyed sustained double-digit growth throughout the past 7 or 8 years, particularly during the onset of the pandemic and subsequent lockdowns, but Manchester has.

Furthermore, property investment in Manchester also enjoyed yields averaging over 6% – and are consistently found at the summit of UK rental investment charts and research. The unique performance is due to a unique set of circumstances.

Supply and demand fundamentals

Undersupply is systematic in the UK. It’s why UK real estate as a whole is always regarded as an investment safe-haven and a useful portfolio hedge among the wider volatility seen in other markets and equities.

In Manchester the undersupply is acute. Recent estimates suggest the imbalance that has been driven by large influxes of people to the city centre will only heighten as a further 70,000 or more people move to Manchester over the next 10-year period. As the current city centre pipeline barely surpasses 12,000 units, supply will again fall short of demand and it is expected prices and rents will increase further still.

Government investment

Manchester is the heart of the current Northern Powerhouse and Levelling up plans. Numerous successive governments have been keen to address the north-south divide in the UK’s economic output and Manchester has received billions of pounds worth of funding and became the first city outside of London to have a democratically elected mayor.

It isn’t only the UK government directly investing in Manchester either. Both China and the UAE have spent millions of pounds acquiring assets and interest in the city in recent years. 

This has led to sustained economic growth and job creation – and in turn, has helped support the property market and its growth.

Manchester young professional and student property market

It is widely known in investment circles that Mancheter’s tenant market can turn a good investment into a great investment. The city has the most rapidly expanding private rented sector in the UK with 60% more 25 to 29-year-olds than the UK average and it’s impacting investment returns significantly.

Over the past 5 years, Manchester has been home to the highest rental yields of any major city in the UK. Yields currently average just under 5.5% – although investors who know the market well can achieve much higher yields.

Many investors target properties with close proximity or with strong transport links to the city centre as they are very attractive and popular with the young professionals that reside 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 llargest universities (plus a further 2), attracting more than 100,000 students.

Future performance of Manchester property prices

As mentioned, Manchester’s property market recorded sustained growth through the pandemic and numerous lockdowns with pent-up demand leading to a stellar 2021. Some of the performance can be attributed to the artificial surge created by the UK’s decision to cut stamp duty for a period, but despite the levy holiday ending in September 2021, the Manchester market shows no signs of slowing down.

Analysts have suggested that post-pandemic, Manchester would undergo both the largest capital (17.1%) and rental growth (16.5%)in a 5-year period of any British city. Many investors and landlords have already experienced this firsthand last year, with a 34% Y-o-Y rise in the number of inquiries for city-centre flats and apartments. Of course, with heightened demand, came heightened rental rates too.

Where and what to buy in the Manchester property market

City centre apartments are currently undervalued in many major cities across the UK and investors are very keen to acquire studios, one-bed and two beds.

As mentioned, they are the favoured residences among the millions of young tenants in the growing private rented sector, but there is also an imminent price correction about to happen too.

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’. Almost uniformly across the country, larger detached properties with gardens and enough room for a home office became very popular. Conversely, prices of smaller but extremely conveniently located city centre properties stagnated. Now that the UK is heading back to the office the opposite is true.

In Manchester, this is happening very quickly, but favourable assets and prices can still be found. For context, since 2020 the average price of a detached house in Manchester has risen from £350,000 to £550,000 while flat prices dropped from £220,000 to £180,000. Many investors still believe apartments and studios are undervalued by about 5-10%.

Manchester property market locations

Because buyers recognise the value that can be found in property investment in Manchester across apartments and flats, currently most of the acquisitions are focused in the city centre region.

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 are the supply and demand imbalances, but there is no doubt some locations are more sought after than others.

The M1 postcode and others in the very heart of the city – particular those close to riverside views – have consistently offered yields consistent over 5.5% and it’s been suggested could experience a price rise of almost 23% this year.

In terms of what to look for, the focus should be on apartments and studios in complexes that have 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.

Suburbs towards Cheshire

Beyond the city centre and out towards the suburbs of Greater Manchester, the market changes quite dramatically. 

To the north, property prices tend to be lower, while heading south towards leafy Cheshire it is not uncommon to find most detached houses listed for at least £700,000.

Again, property prices throughout the Manchester region outperform national equivalents. In Cheadle for instance, a small town on the outskirts of the region, average property prices have increased 13.4% over the past 12 months.

Investors need to be wary that stock levels can be quite low outside the city centre with many residential purchases offering at least the asking price.

Again, given that, it is worth reiterating the investment focus will be in the city centre, but apartments in Didsbury, Cheadle and Altrincham may still be acquired at a favourable entry-level.

Find property investments in Manchester

Chestertons are experts within the Manchester market having matched listed properties with portfolio needs for investors all over the world.

We can help you source both prime city-centre developments such as the prestigious X1 and Deansgate Square developments and the pick of high performing suburbs such as Altrincham.

Get in touch below to start your search.

Information sources: / I Love Manchester / Alliance

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