What’s Ahead For The Manchester Property Market?
Manchester was the talk of Cannes at MIPIM this spring. Whilst the urbanbubble team took our Glastonbury ‘fallow year’ for 2018, after representing the city at the global conference for four years running, we kept a close eye on commentary at MIPIM.
One thing is true: Manchester’s property market is expanding at a rate of knots. A wave of residential apartments is coming to the city, and this influx of supply is already having an impact on the sector. Here, we take a look at some of the market speculation and ask: what’s ahead for our great city?
The rise of Build-to-Rent
There are currently 30,000 apartments in Manchester city centre. To date, the rental market has been dominated by Buy to Let units, so it’s no surprise that the rise of countless Build-to-Rent schemes is being viewed with some concern by landlords in the city.
Between now and 2020 there will be approximately 13,000 new residential apartments coming on-stream within the city boundary. These are primarily large-scale, institutionally owned developments, and they come with far more facilities and amenities than the 30,000 units built between 1998 and 2006.
These customer-first schemes focus on providing a better lifestyle for the customer. Typical amenities include free wifi, a concierge, an on-site gym and welfare services. There’s no doubt that Build-to-Rent is going to transform the rental market, but how does it affect BTL landlords in Manchester?
The impact on BTL landlords
Some BTL landlords have already reported a softening of rents over the past 15 months. It’s hardly surprising, given that the city centre has seen an 8% increase in supply. This has led many to question whether Manchester can handle the wave of new apartments. There is even talk of a possible collapse on the cards.
However, you only have to look across the pond to ageing apartment blocks in US cities such as New York, Los Angeles and Houston to see that this is very unlikely to happen. Demand is still high in these thriving markets, and this optimistic outlook is supported by strong research on Manchester’s residential market from the likes of Deloitte and Savills.
Yes, we can’t ignore the fact that prices will be impacted in the short- to medium-term – especially as graduates, fresh out of their £180pw student accommodation, enter the market with their own high expectations. However, it doesn’t mean that apartments without the shiny new BTR facilities won’t also have their place within it.
Besides, landlords have enjoyed exponential growth of rental income and property prices in recent years. Rents have increased, on average, by 9% over the last five years, while the rising value of property over a 30-year period has given owners sustainable and steadily growing returns on their investment.
What you’ll see in the run-up to 2020 is rent dropping slowly, followed by a stable 3-4% growth rate. Those who are prepared to invest in their property will undoubtedly benefit from higher yields and better occupancy rates.
The key to success in Manchester
When you compare Manchester to other locations across the UK, being based in the city is a first step to success in itself. However, beyond this, landlords should consider how they care for both their asset and their customer, the tenant.
The golden age of BTL meant that few landlords have felt the need to undergo capital improvements on their apartments to date. Now is the time to start thinking about what you can do to improve living standards for your resident. Are you providing for their needs? How can their accommodation be improved?
Ask these questions and you’ll be one step closer to protecting and maximising your returns as Manchester’s new wave of developments hit the market.