CategoriesManchester

Manchester is one of the most exciting cities in the UK for buy-to-let property investment. It’s easy to see why: a growing population of young professionals, three prestigious universities, consistent growth in property and rental values, vast investment and regeneration, and a thriving tech sector. The list goes on.

Plus, there are a growing number of buy-to-let properties available at prices to suit the budgets of all investors. New developments are spread out over several areas, such as Media City, Salford, Ancoats and the student-friendly districts of around Oxford Road.

This last point, in particular, is a major reason why many investors have turned their attention towards Manchester. London was once the go-to property investment location in the UK, but the average price of a property in the capital is now out of reach for many. It has led to tighter rental yields too.

Meanwhile, Manchester has emerged as the new hotspot. There are attractive entry-level prices, high yields, and plenty of potential for further growth.

As a property investment company operating in Manchester, we’ve seen this trend in action over the past few years. And we’ve advised our clients to look northwards, helping them to find the best buy-to-let projects in the region. So, in this guide, we’ll share what we know, and make the case for buy-to-let in Manchester.

Why Buy-to-Let?

A buy-to-let property is any which has been purchased with the intention of letting it out. This can be through a short term model (e.g. Airbnb) or as part of a long-term, traditional tenancy agreement.

There are, of course, other property investment strategies, but we’re huge advocates of buy-to-let. Here’s why:

  • Monthly rental income should cover all costs, whilst still providing a profit for the owner
  • Long-term, properties increase in value (even accounting for temporary dips, like a global recession or a pandemic), meaning owners can benefit from huge capital appreciation
  • Buyers can usually leverage their purchase with finance, requiring a much lower initial investment
  • Modern buy-to-let projects have property management companies in place, allowing for a hands-off investment
  • There’s a wide resale market as a proven, high-performing buy-to-let will always attract interest from other investors (along with those looking to purchase their own home)

Why Buy-to-Let in Manchester?

There are four clear reasons to purchase a buy-to-let in Manchester:

  • Rental prices are growing
  • Rental yield performance suggests clear profitability in the market
  • Property values are growing
  • It’s a desirable place to live, work and visit

We’ll explore each of these factors in more detail below.

Rental Value Growth

Boosted by higher demand than ever, the average rental price in the northwest has increased on average 6.3% year on year, up over 12% since April 2019. Being one of the most economically productive and culturally significant cities in the UK, Manchester is in the ideal position to capitalise on this growth.

Real estate consultancy company, JLL, forecast an estimated increase in Manchester’s rental value of 12.5% by 2025. This substantially outperforms the UK average and suggests a quick recovery from the effects of Covid.

Rental Yields

Rental yields are a strong indication of the strength of an investment and the desirability of an area for people looking to rent properties. They are calculated by dividing the total rental income over 12 months by the property’s total value, resulting in a percentage. Obviously the higher this number, the more profitable the investment. To learn more about rental yields, read our guide.

Manchester’s rental yields are usually among the best in the UK, far outperforming London and southern England. This is bolstered by reasonable property prices and an influx of young professionals and students creating a constant demand for rental accommodation. These factors often see Manchester named the best city in the UK for buy-to-let investors.

 

Capital Appreciation

Property values all across Greater Manchester have shown excellent growth in recent years. Data from the HM Land Registry shows the average property price has increased by 40% since 2015.

This is another string in Manchester’s bow. Property value growth (also referred to as capital appreciation) can net buyers huge returns on their investment.

And more is predicted too. JLL predict Manchester’s property values will increase by an average of 18.5% by 2025.

A Leading, Modern City

Simply put, Manchester is a city that people want to live in. TimeOut even named it the best city in the UK, and third-best in the world.

The UK’s second city is an equal match for London, with a booming job market, top transport links, world-class bars and restaurants, high-quality property, vast regeneration schemes, and rich history in music, sport and culture. Yet, the cost of living is up to 30% lower, with property, in particular, proving to be far more affordable.

Its status as a leading light attracts tourists too. The visitor economy is worth over £7.5bn annually, with Manchester the third most visited city in the UK after London and Edinburgh.

All of this should be welcome news to a buy-to-let investor. A desirable city will further contribute to the demand for rental property and boost property values.

Market Forecast

Almost every study of the Manchester property market forecasts major growth in the city and the surrounding region. Here are the highlights:

  • Savills estimate property values will grow by 18.8% over the next five years in the North West, the best of any region in the UK
  • JLL predict rental values will grow by an average of 2.9% per annum, above the national average
  • The GMCA suggest GVA is set to grow in Greater Manchester by 2.3% per annum, adding an extra £37bn into the local economy by 2036
  • Greater Manchester’s population is growing quicker than the national standard, with the ONS predicting a further 10% growth over the next 20 years (300,000 more people)

To learn more, read our Manchester property forecast.

Compared to Liverpool

Separated by a mere 34 miles along the M62, Manchester and Liverpool have long been fierce rivals. In sport, football clubs from both cities have battled away for decades. In music, one gave the world Oasis, The Smiths and The Stone Roses, the other gave us arguably the most famous and successful band ever, The Beatles.

And the two often compete in other fields too. Property is one. The truth is that the property markets in both cities have incredible potential and offer huge amounts of value for buy-to-let investors.

In a recent post, we compared whether it was better to invest in Manchester or Liverpool.

Based on the available data and our own expertise, Manchester and Liverpool represent the two best cities in the UK for property investment. Historically, they’ve suffered from economic downturns, but the outlook could not be any more different today.

Huge investment has stimulated a rapid improvement in both city’s fortunes since the 1990s. The introduction of the “Northern Powerhouse” in 2014 boosted growth and private investment is now pouring in by the millions.

So, it’s hard to split the two. One argument could be that whilst Manchester is predicted to offer better growth in rental values and property prices over the next few years, Liverpool is slightly more affordable as it stands (and the forecasted difference is only small).

Some investors will prefer the lower entry price of Liverpool, whilst others may want to benefit from the stronger growth of Manchester. At the end of the day, you really can’t go wrong with either.

Student Market

Greater Manchester has two major universities: The University of Manchester and Manchester Metropolitan University. There are also several other educational institutions, such as the highly-regarded Royal Northern College of Music and The University of Salford.

Overall, there are approximately 100,000 students in the city at any one time. And there’s an impressive graduate retention rate of 51% (the second-highest in the country after London).

International students form approximately 20% of the University population. They’re attracted by the internationally renowned level of education provided by the city’s educational institutes. The University of Manchester, for example, is a Russell Group member and ranks in the top 100 universities globally. Alumni and professors of the University have contributed significant developments to the fields of physics, computing, biology, engineering, and more. This prestigious status attracts students from all over the world.

And where students go, business follows. Manchester’s conveyor belt of top talent has influenced companies such as Amazon, Google, Microsoft, Booking.com, and others, to set up offices in the area. The BBC and ITV call Salford’s MediaCity home. And several Manchester-born companies have flourished in recent years, including Boohoo, AO, and AutoTrader. This creates a thriving job market and contributes to the exceptional graduate retention rate mentioned above.

Why is This Good for Investors?

The vast, growing student population means there is a consistent demand for varying types of student property to suit all budgets. This includes houses and city centre apartments to purpose-built accommodation on or near campus.

Plus, with so many graduates choosing to stick around or come back (around 57% of students who leave Manchester to study elsewhere return after graduation), there’s a constant influx of talented young professionals into the city’s rental market.

Manchester’s buy-to-let investors stand to benefit from both groups. Student property usually attracts exceptional yields, either as a result of renting to multiple occupants in a Student HMO or from well-funded students paying higher prices for better quality, purpose-built accommodation. Meanwhile, well-finished city-centre apartments appeal to the young professionals who stick around. Such apartments achieve excellent returns for investors through solid yields and capital appreciation.

If you’d like to learn more, read our guide to student property investment.

Where to Invest in Manchester?

It’s clear Manchester is an excellent choice of location for any property investor. So, with that in mind, where are the best places in the city for investors to consider and research?

Greater Manchester is a metropolitan county comprising of 10 boroughs: Bolton, Bury, Oldham, Rochdale, Tameside, the City of Manchester, the City of Salford, Trafford, and Wigan.

The highest rental prices are generally achieved from properties in the City of Manchester, although higher than average property prices can deter some investors from choosing a more centrally located property. Below are some of the most popular areas for investment in the region:

  • Northern Quarter: Manchester’s bohemian and artistic hub, the Northern Quarter is home to a range of indie bars, fashion designers, art galleries and music venues. A city-centre, cultural hub located within minutes of Piccadilly Train Station, demand for rental property is high, making it a very attractive prospect for buy to let investors.
  • Ancoats: Running parallel to the Northern Quarter is Ancoats, an area that has undergone significant regeneration. Its old mills now house modern apartments, highly regarded bars and restaurants, including Manchester’s first Michelin starred restaurant since 1977. The average property price in Ancoats is £214,800, which has increased by 23% over the past 5 years.
  • Salford Quays: Slightly further out from the city centre is Salford Quays. Once providing the city with a vital supply of goods during the industrial revolution, it is now home to the BBC and ITV after an initial £650m investment into the development of Media City. There’s a further £1bn in private investment planned for the area by 2030. The area is home to many digital and creative industry businesses. The average property price is £248,833 (Zoopla) although flats in the area can go for a lot less.
  • Trafford: Trafford is an area with some world-class attractions, such as Old Trafford football ground and the Trafford Centre. Well serviced by transport links including the completion of the Trafford Centre Metro line in 2020, Trafford sits along the border with Cheshire and it covers areas such as Altrincham, Sale and Stretford. Rental yields in the more affluent areas such as Altrincham can be quite low at around 3%, however, areas like Stretford can easily reach over 6%.

If you’re looking to learn more about different areas in Manchester, we researched the postcodes achieving the best rental yields and the highest growth in purchase price.

We found there is value and heaps of potential to be found across the region. In particular, areas like Salford Quays, Ordsall, Ancoats, Levenshulme are excellent choices thanks to significant regeneration and a high volume of new apartment blocks aimed at young professionals.

What Type of Buy-to-Let in Manchester?

The type of buy-to-let property in Manchester to go after really depends on your budget and aims, so we’ll review a few options in this section.

Student Houses and/or HMOs

A house in multiple occupation (HMO) is a property where several tenants (usually at least 3) co-reside and have separate tenancy agreements with the landlord.

This type of property naturally includes student housing. As such, you’ll find plenty of HMOs in Manchester’s student-heavy areas, like Fallowfield, Hulme, Rusholme, Withington and along Oxford Road. There are non-student HMOs available all across the region, too.

Whilst an HMO buy-to-let in Manchester tends to generate a good yield, it will usually require a hands-on landlord to maintain and manage the property. Tenant turnover is usually much higher, although it’s rarer to have an entirely empty house so void periods are softened.

Plus, it’s worth keeping in mind that many students are now opting for purpose-built student accommodation (PBSA) over the traditional house share. PBSA is generally much higher quality and offers on-site amenities, like gyms, private parking, and communal rooms. They’re a student version of the all-in-one, city-centre residential blocks that have become incredibly popular for young professionals.

PBSA

PBSA, or ‘purpose-built student accommodation’, are apartment blocks built to provide higher-quality student flats for either individual students or groups.

Manchester City Council has recognised an undersupply of PBSA in the city and wants to increase the number of PBSA units available over the coming years. These will likely come along Oxford Road and into the city centre.

As with any student housing, PBSA is generally cheaper than a typical residential property, yet offers consistently high yields. The downside is that property values tend to not grow as quickly.

City-Centre Apartments

In the past 10 years, Manchester’s skyline has changed dramatically. The Beetham tower in Castlefield once stood alone as the tallest building in the city. It now has two residential blocks at Deansgate Square for company, with the South Tower taking the mantle as the tallest (and in fact, the tallest building in the UK outside London).

New blocks have been erected at a frightening pace. Nearly 50% of the buildings over 50m in Manchester have been built since 2010. Many have been in the city centre to house young professionals.

The performance of these blocks is fantastic. Young professionals are willing to pay good prices for high-quality apartment blocks in central locations, so yields are strong. Meanwhile, the value of such properties grows quickly.

We tend to recommend this type of property most often to our clients. There are two options: properties that are already complete, or properties in construction (which we refer to as “off-plan”).

We think there’s a tremendous amount of value to be had in off-plan property, especially for buy-to-let in Manchester where there are a number of impressive projects in the pipeline. You can learn more about off-plan property here.

How Much Will I Need?

The budget required to get started with buy-to-let in Manchester will depend on the property you’re after.

Our suggestion is to set aside a minimum of £50,000. This is a reasonable starting sum that most first-time investors have available. With £50,000, cities like Manchester are excellent choices as property values are still low enough that your budget can cover a deposit on a city-centre apartment. A mortgage will cover the rest.

We’ve discussed how to invest £50k in property previously. You can invest in property without vast amounts of capital, especially if you target off-plan properties.

However, £50,000 may not be enough if you’re looking to invest in one of Manchester’s student properties. Although values are lower, PBSA cannot be bought with a mortgage and must be paid in full by cash.

Summary

By this point, the reasons to invest in a buy-to-let in Manchester, and the long-term benefits of doing so, should be clear.

We consider it to be the best city in the UK (along with Liverpool) for buy-to-let investment. And that’s why we review all of the latest projects within the city to find suitable investment opportunities for our clients.

If you’re interested in learning more or finding a property, please get in touch and one of our team would be more than happy to run through your options.

We’ll support you through every stage of your investment journey, from finding a property to providing after-sales construction updates. We don’t charge any fees for our service and we’re part of the Property Ombudsman, an organisation designed to protect investors. Contact us to learn more.

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