Insight – is Manchester the top UK investment city?

Manchester, once an integral part of Britain’s Industrial Revolution, remains one of the UK’s most important and fastest-growing cities, having performed well this year despite challenging global circumstances.

As England’s third-largest city, Manchester continues to drive strong returns for investors in the form of long-term capital growth and strong rental yields.

With the city expecting even more growth, property investment firm Select Property Group explores some of the key reasons why Manchester is such a strong investment hotspot.

Higher rental yields

Manchester is performing better than the national average in terms of rental yields with an average of 5.37%, compared with 2.83% in London. This is due to more affordable property and consistent tenant demand in the city, meaning lower capital entry and high monthly rental costs – a win-win for investors.

Making now an ideal time to invest, Manchester is forecasted to have both the highest sales price (17.1%) and rental growth (16.5%) of any UK city over the next five years.

Tenants are willing to pay a premium to live in Manchester city centre. In fact, separate research from Urbanbubble revealed rental costs on one-bedroom apartments in the city have risen by 24% in the last five years, reflecting both heightened demand and better-quality stock.

Growing population and economy

More people than ever before are expected to live and work in Manchester over the next 10 years, with population growth increasing at twice the national rate, and 15 times the rate new homes are being built at.

With 80/100 of the FTSE Top 100 Companies located in Manchester including Amazon, BBC and Kellogg’s, the city has a growing talent pool, specifically in the areas of research, engineering, manufacturing and digital technology.

Since the Covid-19 pandemic, developers have submitted planning for 2.6 million square foot of office space in Manchester, signifying high confidence in the job market.

High graduate retention rates

Select says of this expanding population, 45% are under the age of 35 – a positive message for buy-to-let investors as over a third of millennials will now rent their entire lives. Demand is only expected to increase in Manchester, with over 100,000 students attending universities across the city, producing around 36,000 high-quality graduates every year.

As reported by Savills, ‘the city enjoys the highest graduate retention rate outside London, capturing 60% of leavers from its four universities’ – graduates who will likely go on to rent.

The figures align with Manchester being voted the UK’s most liveable city for the past ten years in The Economist’s Global Liveability Index (2011-2020). Measured by factors including environment, healthcare, education, culture and infrastructure, this is a good indicator of what tenants are looking for.

An established Build to Rent offering

Manchester now has the highest Build to Rent skyscraper cluster outside of London. Because these developments are designed, built and managed with the resident in mind, high-quality Build to Rent homes directly respond to tenant needs and changing priorities.

Amenities typically include larger living spaces, access to fast and reliable Wi-Fi, co-working areas, outdoor space, building management, a gymnasium and a pet-friendly policy – trends accelerated by Covid-19.

Residents are willing to pay a premium for their living experience. In fact, in December 2020, Build to Rent apartments rented for £181 per month more than regular apartments in Manchester on average.

High-profile investment projects

A number of high-profile projects are underway in the city, including the government’s £106 billion ultra-fast railway, High-Speed 2 (HS2), on which Manchester will be a major hub with two stations.

HS2 is expected to cut journey times from Manchester to London to just 68 minutes by 2032, making London within commutable distance. Forecasts suggest up to £834 million increase in economic output as a direct result of HS2, with residential property prices expected to see an increase as a direct impact.

A £1 billion new ‘super terminal’ will be opening at the UK’s third-busiest airport – Manchester International – in 2023, creating 40,000 new airport jobs in the next 30 years. Not only will these high-profile projects bring thousands of new jobs to Manchester, but they’ll also further improve connectivity both domestically and internationally.

Through its strong residential offering, thriving job market and continued investment in public transport, Manchester has shown resilience as a city throughout the pandemic, proving that it is a brilliant place to live and therefore a brilliant place to invest.

You can view Select Property Group’s full report here.