Manchester, benefitting from the recent £1bn investment as part of the Government’s Northern Powerhouse initiative, is showing itself to be a vibrant, forward-thinking metropolis with the most attractive city centre investment market in Britain, according to JLL.
The property specialist company rates Manchester as its No 1 prospect for residential price growth over the next five years, with the annual average growth of 4.2pc compared with 2.4pc across the UK. Rents are expected to increase by around 3.5pc per annum between now and 2020.
House prices grew by 10pc in 2017, with the average two-bedroom flat now costing £250,000 (an increase of 8.7pc over 2017), and rental prices rose by 3pc, according to JLL’s latest research.
Pivotal to Manchester’s success is a revival in demand for city-centre living – a trend that was at its height before the 2008 recession, which collapsed along with house prices due to sheer oversupply.
In 2000 there were 10,000 people living in the heart of the city. Now there are nearly 70,000, many of them students or young professionals with a desire to live close to where they work and play.
“City living has gained strong momentum in Manchester over the past three years and, together with an active student market, has pushed demand in both the sales and lettings markets noticeably higher,” says Neil Chegwidden, of JLL residential research.
“And with housing supply in the city centre severely constrained, prices and rents have soared.”
For investors with an eye on Manchester, its student population of more than 85,000, spread among four universities, plays a crucial role.
The city has the highest retention rate of students after London, with 50pc choosing to stay after they graduate. Six in 10 Manchester-born students who go to university elsewhere also return to their home town after graduation.
Nick Whitten, JLL’s director of UK research, says: “You can see the reasons. They already know they enjoy living there and there are plentiful employment opportunities and affordable housing.
“More new businesses are coming to the city than anywhere else in the UK, outside London. Many of them are first-time investors in the city, which is a reflection of Manchester’s growing profile.”
Manchester: a market snapshot
The young demographic is also a driving force in the number of rental properties in Manchester – which constitute two-thirds of the city centre’s housing stock. A fast-emerging trend is a build-to-rent market, which accounts for a large proportion of the 30 new residential developments currently being built.
“Professionally managed blocks of rental apartments with leisure facilities and concierge services are forcing private landlords to up their game, which is a positive thing.
“Shortly, we could see landlords offering similar white-label services such as local discounts and access to a network of handymen to stay competitive,” says Mr Whitten.
JLL identifies nine Manchester “sub-markets” that offer potential to investors, including the centrally located Northern Quarter, Piccadilly and Castlefields, with its urban canalside living. St John’s Deansgate has become a prime market, with sales there last year regularly exceeding £500 per square foot.
Across the River Irwell, suburban Salford is prominent on the radar of the millennial market seeking a lower-priced, higher-quality alternative to city-centre living.
Salford is also a key focus for buy-to-let investors, with Salford Quays now the UK’s second-biggest media hub, home to 80 media organisations.
“It has the benefits of being well connected to the city centre but better value in property terms. There are 7,500 homes in some phase of development in the Salford City Fringe, and Salford Quays attracts a professional audience, which makes it a good place to invest,” says Mr Whitten.
He thinks that another area to watch is Ancoats and New Islington, whose regeneration is largely funded by the owners of Manchester City Football Club.
As the momentum and investment continue in creating the Northern Powerhouse, Manchester is arguably the poster city and the greatest beneficiary so far, with a new arts centre, two new research institutes and improved transport infrastructure.
It has also seen the highest rate of job creation in the country, with the number of new jobs growing by 84pc between 1999 and 2015.