Both the capital city of London and the UK’s “second city” of Manchester are prime destinations for culture, tourism and all-around opportunities with a buzzing social, cultural and sports scene, renowned universities, and great job prospects.
But there is one key factor that means Manchester pips the capital to the post. Because when we compare London to Manchester, we are really comparing London to the vast potential of the Northern Powerhouse and the supercharged growth across this region.
According to the latest UK Cities House Price Index from Hometrack, London’s house prices dropped 0.5% over the past year while Manchester continued to see solid growth at 4.5%. Property prices have exploded in Manchester over recent years, and this is because the northern city has experienced – and continues to experience – an exceptional transformation.
As more and more investors recognise the potential of the northern regions, Manchester has developed into one of the most dynamic cities in the UK with great investments being made into transport, education and economic growth to name just a few key areas.
Gone are the days when the north was considered less favourable than London and surrounds, as the Northern Powerhouse initiative has created an exceptional quality of life, and the property market is part of it all.
Manchester has everything that London offers – culture, higher education, beautiful cityscapes with historic canals – but without the fierce property prices and with a vast scope for future growth.
In addition, one chapter in the Manchester success story looks exceptionally promising, and that’s the job market. More and more companies are choosing Manchester for their headquarters and graduates are responding in kind.
More than half of graduates are choosing to stay in the city after their studies are complete to take advantage of the range of quality job prospects – and the vibrant social scene. It now boasts the highest graduate retention rate outside London but without the high property rental prices of the capital.
With young professionals one of the prime target markets for private rental property, demand already exceeds supply. Major developments continue to be planned across the city, and the quality of new accommodation is improving all the time with remaining affordable, the latter of which cannot be said for London.
Manchester is also fast becoming a prime location for specialist and highly sought-after jobs in media, design and tech. As the chosen home of many start-up networks and the majority of FTSE companies having a presence in the city, Manchester encourages further investment and is of great appeal to talented graduates.
We are seeing rising numbers of people leaving London in favour of the northern cities, and particularly Manchester, which has the second-highest individual earning potential outside the capital. Indeed, the business opportunities in Manchester are just as exciting, but there is far better value for money when it comes to both property rentals and general cost of living.
Manchester’s population is expected to continue rising, and this can only be good news for property investors. Manchester is more favourable when it comes to buy to let as it is only at the beginning of a very exciting growth curve. While the city centre offers great prospects for buy-to-let investors, we are starting to see the ripple effect previously experienced in London with opportunities opening up in regions around the city suburbs and across Greater Manchester.
With transport and connectivity improving all the time thanks to continued investment, the buy-to-let market is booming, and the HS2 railway will add £6.6 billion to the North West’s Gross Value Added (GVA), with Manchester one of the locations set to benefit the most.
High demand and low stock make Manchester a very desirable location while a range of cultural, sports and business events are now focused in the capital, attracting more and more tourism and increasing the city’s profile all the time.
The impact of Generation Rent is also being felt as the city centre rental prices make this an attractive prospect for the older generation wishing to make the most of their golden years by downsizing and moving to a rental property with a buzzing city centre location.
Manchester is currently the top performer for average yields, yield growth and capital gains forecasts across the entire country. It boasts some of the highest rental yields in the UK of 5.5% and a 5.76% average rental increase in the past year.
In comparison, the yield average in London is just 3.05% because the appeal of the capital is fading fast. Put simply, there are not enough affordable homes, but this could not be further from the case up in Manchester.
There are positive prospects for capital growth as more and more development plans become realised under the Northern Powerhouse umbrella with projected rental price growth of 5.76% and impressive projected capital growth. In comparison, London will see an average property value of £597,544 by 2027, making it the second most expensive city in the UK, despite a lower growth rate of 24%.
Even in the wake of Brexit uncertainty, Manchester continues to remain a popular option with overseas investors, which has had a further positive impact on rental opportunities. London’s growth has slowed down considerably while Manchester’s growth curve is speeding up.
As the jewel in the northern crown, it benefits the most from the Northern Powerhouse investments and also boasts established credentials that enhance its appeal. It is the home of Europe’s largest indoor arena, world-famous football clubs and the HOME centre, as well as the host of the esteemed Manchester International Festival. This all combines to make it a very desirable and solid destination for return on investment.
House prices in London remain the highest in the UK but Manchester offers a fantastic combination of affordable house prices, lower yields and positive rental price growth for a safe, exciting buy-to-let opportunity with great profitability. London has had its moment, but for now, it’s all going on up north, and the future looks bright.
For more information on our range of buy-to-let investment opportunities, contact Alesco today.