City spotlight: Manchester
Strong economic growth, attractive yields and substantial spending on infrastructure makes the city a growing hub for investment.
Once at the heart of industrial revolution, the city of Manchester in northern England is now benefiting from an economic renaissance.
In 2011, the British Broadcasting Corporation moved its Headquarters and 2,300 staff from West London to Manchester’s MediaCityUK quarter in Salford Quays1. It was the anchor for a major redevelopment project, attracting other media and tech companies.
During a visit to the city last year, China’s President Xi Jinping announced a £130m business hub at Manchester Airport to accommodate Chinese companies seeking a British base. The new hub is within the £800m Airport City development, to be built by a consortium of UK and Chinese companies and financed by Asian investors2.
Meanwhile, the Abu Dhabi United Group, which owns Manchester City Football Club, along with Manchester Council, both recently announced plans to spend £1bn on building 6,000 new homes on the eastern fringes of the city, in Ancoats and New Islington3.
Manchester is at the centre of the UK government’s ‘Northern Powerhouse’ plan for the north of England, including major transport infrastructure improvements to better connect towns and cities in the region4. The proposed second phase of the HS2 high-speed rail link is planned to reduce journey times between Manchester and London, although it’s not due to be completed until 20335.
These initiatives are attracting the attention of large companies. 65% of FTSE 100 firms, and other high profile businesses, now have offices in the city, including JD Sports, Google, KPMG, Deloitte, MoneySupermarket and Thomas Cook6.
“Manchester’s housing market has been given a significant boost recently as many areas of the city have been redeveloped and new investment has flowed in to build more homes,” says Paul Deen, Head of International and Private Mortgages at Barclays Wealth. “The new interest among international investors in Manchester’s housing market means this process is set to continue.”
This confidence in the city is having a positive effect on its residential property market.
Booming house prices
According to agent Jones Lang LaSalle (JLL) Manchester city centre is where many property buyers prefer to invest. The area is witnessing a strong uplift in prices driven in particular by buyers competing for a limited supply of properties for sale7.
Manchester flat prices (increase YOY)
|Year||Two bedroom flats|
Source: JLL website, ‘Northern Renaissance’ February 20167
Neil Chegwidden, who works at the company’s residential research division, says: “There is particularly high demand at the top end of the market, with an increasing numbers of buyers looking to spend £250,000.The upper end of the market, above £750,000, is also witnessing greater demand.”
But the city’s property market is yet to fully recover from the global financial crisis, despite the promising growth figures from JLL. Research by property consultant Hometrack shows that house prices in Manchester are still 1.6% below their 2008 peak, after which they dropped by approximately 20% and then staged a slow recovery8.
Rising demand for rental properties
Rental yields from property in central Manchester have been on the increase with rents rising sharply. JLL says that during the final months of 2015, there were six applicants per letting. The average time for a letting to be secured was less than 72 hours7.
“Market pressures have led to an 8.5% increase in rents during 2015, with a typical two-bedroom apartment now commanding more than £1,000 per calendar month,” says Neil.
According to the recent Savills ‘Future of Manchester’ reports, “The number of households renting privately in central Manchester and Salford rose by 436% between 2001 and 2011 and now represents 63% of households in the city centre9.”
The city’s 100,000-strong student population is a strong driver of demand for rented property, according to JLL10. Savills recently promoted Manchester into its top league of university towns and cities, which ranks all 84 into five leagues by potential of student market development11.
Beyond the city centre
The property market outside Manchester’s large central zone is more variable. The city is effectively a collection of towns surrounding the city centre, each with different market characteristics and varying rates of gentrification and redevelopment.
Richard Donnell, head of research at Hometrack, says: “Growth has been led by the high value areas of the city such as Trafford and Stockport, where house prices are rising by 6.7% and 5.9% respectively.
“The lower-value areas have under-performed although Salford, Bury and Tameside have seen house prices rising at between 4.1% and 4.8%.”
A strong future overall is predicted for the city. A recent Savills report says that “prospects for residential investment have greatly improved over the past 18 to 24 months in Manchester.
“Many city centre schemes are achieving values in the region of £300/sq. ft. with achievable rents of about £17/sq. ft. to £20/sq. ft. Gross yields are around 6%.
“As a result, Manchester has become a focus for investors including Housing Associations, Private Companies, UK and European Institutions and Private Equity, as well as overseas capital from the Middle East, China and US 9.”
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