London’s increasing cost of living and comparatively poor yields – averaging 4% – means investors are now looking elsewhere to make healthy returns on their money.
This article explores 5 key reasons why Manchester, the city with the highest average yields in the country of 6.15%, presents the best ROI opportunity for property investors:
1. Improved transport links
The momentum – and the money – is heading north. As the country gears up for the first phase completion of the £42.6 billion HS2 in less than a decade’s time (2026) – which cuts travel time from Manchester to London in half – Andy Burnham’s ‘Northern Powerhouse’ looks set to rival London’s longstanding reign and end the years of centralisation to the UK capital.
Additionally, Manchester airport is undergoing a £1bn expansion to more than double the current annual passenger capacity to over 55 million, stimulating the economy and further cementing Manchester’s position as ‘Capital of the North’.
2. Regeneration of Salford and MediaCityUK
Salford has undergone one of the largest urban regeneration schemes ever initiated in the UK. The arrival of ITV and BBC headquarters to MediaCityUK in 2011, attracted by studio space that cost half that of the capital, continues to bolster Manchester’s status as the biggest tech and creative hub outside of London. As such, over 60,000 people are now employed in the media and tech industries in Manchester and with MediaCityUK predicted to double in size over the next decade, by 2034 this number is expected to increase by 27%. This high demand will drive up rental prices and increase competition for property, ideal for buy-to-let investors who act quickly.
3. Hotspot for Young Professionals
The housing market is booming: with extortionate rents pricing many out of London, young professionals are looking for alternatives to the Big Smoke – where they stand a better chance of getting on the housing market. In a report published by JLL in February 2017, they forecast an increase of 28.2% in house prices and 20.5% growth in rental prices in Manchester over the next five years due to population growth.
Manchester boasts the largest student population in Europe, with over 100,000 students spread across 5 universities. More importantly, statistics highlight
that graduates are staying put in the city – Manchester is home to 60% more 25-29-year-olds than anywhere in the country. This is due to universities producing newly qualified graduates ready to grasp job opportunities emerging from the city’s economic growth, which gives potential investors the high-rental opportunities to target those young professionals who are more likely to be renting than purchasing a property.
4. Rising Population and Job Growth
Manchester’s population is estimated to increase to 625,000 by 2025 – a rise of 20%, whilst Savills research estimates that 70,000 new jobs will be created in the private sector by 2025. As one of the fastest growing populations in the UK, coupled with one of the lowest levels of housing units, Manchester has now become the ideal environment for potential investors to enter its property market.
Manchester plans to add 227,000 homes and 200,000 jobs by 2035. Despite development plans, there is a critical undersupply of accommodation as there is 9,400 more families than homes. This desperate need for accommodation will in turn, drive rental prices up in the foreseeable future.
5. Highest Yields in the UK
Research has shown that Manchester and Salford have the highest rental yields in the UK. They have average rental yields of just over 6%, whilst in London and Cambridge it is comparatively low 4% and 2.7% respectively. HSBC also found that average returns had grown 6.02% since 2010, compared to a 4.71% rise in London’s highest yielding borough. Although rental costs are extremely high in the capital, house prices have seen a constant increase too and sat at an average of £680,000 in December 2016. This leaves London’s buy-to-let landlords with rather unimpressive returns, showing they should turn their attention away from pricey London and towards the north.
Given Manchester’s improved infrastructure and transport links, its forecast population growth and the successful regeneration of Salford, this is an opportunity that investors cannot afford to miss.
Investors are already capitalising on the power shift northwards, as politicians and businesses refocus their vision of the future to one in Manchester. While the rest of the country flounders in economic uncertainty, Manchester alone remains best placed to invest your money and achieve unrivalled returns.
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5th December 2017