20 17 Manchester Housing Market Study
Execu ve Summary Price and Transactions Timeline (Annual & Monthly) Manchester outpacing most cities in UK in terms of capital appreciation and rental yields Greater Manchester housing market had witnessed capital appreciation of 4.9% in 2015, 6% in 2016 and 5% Y-O-Y till September 17. Prices in Q3 2017 have witnessed a 6.41% growth in comparison to the previous quarter. With the ongoing construction boom in Manchester there has been a 400%increase in residential construction activity thereby increasing the number of units built to 4954 in 2017 from 986 units in 2015. With London and South England s poor property performance and with the government s industrial strategy to invest in North England and Wales in transport infrastructure, education etc housing prices in North West England have been bullish ever since 2016. Manchester comes in the top 3 buy-to-let hotspots in UK with over 7% rental yields as supply of homes is barely managing to keep pace with demand. 1,90,000 1,85,000 1,80,000 1,75,000 1,70,000 1,65,000 1,60,000 1,55,000 1,50,000 1,45,000 2014 2015 2,00,000 1,95,000 1,90,000 1,85,000 1,80,000 1,75,000 1,70,000 Sep-16 Oct-16 Nov-16 Dec-16 43000 42000 41000 40000 39000 38000 37000 36000 35000 34000 2016 2017 Price Sales 4000 3500 3000 2500 2000 1500 1000 500 0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Price Sales Annual Capital Apprecia on 11.9% Median Property Price $242.5 per sq. Quarterly Capital Apprecia on 6.41%
Housing Demand & Supply Manchester Population Growth Demand for housing has steadily increased supported by rising population and rising white collar income Manchester s economy has grown by 60% in the last 20 years attracting young professionals from diverse industry bases. A whopping 3.5B has been spent in Manchester to create the second largest hub for creative industries in Europe. The population of older people over the age of 65 is expected to grow twice as fast as the general population mounting to 61,000 by 2027 which currently stands at 51,000. Change in preference from suburbs to moving back to cities due to leisure, healthcare and shopping will create opportunities for investors and developers to provide housing for the older population. Alongside higher rental yields and quality of life Manchester is also the seventh cheapest city across UK with average salaries not far from what s achievable in London. The most recent 2017 Budget has allocated 1.7 Billion to Transforming Cities Fund, of which 243 m are allotted to Greater Manchester for improving transport connectivity. Abolition of 15%stamp duty for first time homebuyers up-to a maximum property value of 300,000 in November 17 further strengthens the buying power of investors. 5,55,000 5,50,000 5,45,000 5,40,000 5,35,000 5,30,000 5,25,000 5,20,000 5,15,000 5,10,000 5,05,000 2014 2015 2016 2017 Housing Market Size Annual Growth Transac ons Q1 Q3 17 $1.26 Bn 0.87% 4552
Micro-Markets Price Performance and Industry Outlook Manchester will continue to be steady provided there is no mortgage rate hike. City Centre in Manchester, Salford and Trafford are best performers in Greater Manchester. The current average house prices are hovering around 200,000 in Greater Manchester and the recent abolition of Stamp Duty up to the level of 300,000 is a go ahead for first-time buyers and investors as added cost have gone down, thereby increasing demand. With the on-going tech and construction boom prevalent in Manchester, international investors recognize the property market as safe and profitable. Due to the largest student population in Europe, a genuine start-up culture is on the forefront creating opportunities for both businesses and entrepreneurs. It is anticipated that interest rate could rise four times by the end of 2018 to curb inflation due to the expanding economy. This would mean variable rate mortgage payers will incur increased mortgage payments thereby reducing purchasing power and further causing a price decline. Also it will impact the fixed rate mortgage payers as 80%of the fixed rate mortgages are expiring within a year or maybe even less. With the recent announcement of the 1b investment expansion plan for the Manchester Airport and the ongoing construction of High Speed Rail, Manchester will outshine most micro markets within the Greater Manchester housing region. 30.00% 30.00% 25.00% 25.00% 20.00% 20.00% 15.00% 15.00% 10.00% 10.00% 5.00% 5.00% 0.00% North West Central North East South Trafford Salford Tameside Bury 0.00% Gross Rental Yields 3 year capital apprecia on 1 year capital apprecia on Returns 3 Year YOY Oct 17 Data 3 Year Returns
Top Loca ons for Investment Key Developments The Manchester City Centre is the best place to invest in currently followed closely by Salford, Trafford, Tameside and Bury. These locations are witnessing massive developments and the we foresee huge returns on investment from these areas. Major housing schemes at St John s, First Street, Kampus and Great Jackson Street along with unique and distinct neighbourhoods have embodied enormous residential potential in City Centre. Manchester city centre, Salford and Trafford are the three hot-spots in Greater Manchester which have outperformed most of the cities across UK. The government initiated Northern Powerhouse scheme and ongoing construction activity have led to huge returns. Construction activity have outpaced figures prevalent in 2007. To summarize, the best locations in the Manchester Housing Market Area to invest in would be the following: - - Manchester City Centre - Salford - Bury - Trafford - Tameside The Greater Manchester fund has allotted 42.5m from the 300m Housing Investment Fund for nearly 500 homes to be built in Salford enabling the Greater Manchester economy to grow. Galliford Try Partnerships have executed a joint venture of 100m with Trafford Housing Trust to deliver a housebuilding programme. Trafford Housing Trust has also secured 275m refinancing focusing on developments in affordable housing, mixed land use and assisted living new build projects. Top 5 locations for residential transactions (Q1 Q3 2017) 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Manchester Trafford Tameside Bury Salford Q1 2017 Q3 2017 Total Sales
Investment Scores and Returns Micro Market Positioning in terms of returns The areas within the Greater Manchester offering most sought after investment destinations are Central Manchester, Trafford and Salford. From an investor s point of view, assuming the pricing, rental yield and vacancy rate fluctuations remain at their last 3 years average value, rate of returns from investing in Greater Manchester s key micro-markets would be Central Manchester at 23.16%, South 18.9% with Trafford at 23.34% and North West 15.6% with Salford outshining at 27.6%. Investment Score 250 200 150 100 50 0 Tameside North East Bury North West Central Manchester South Trafford Salford 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% Returns Market Gross Rental Yields 3 year capital apprecia on 1 year capital apprecia on Vacancy- GDP Per Capita (factored) Transac on Cost LTV Factored Cost of Capital Capital Gain Tax Rental Income Tax PSF (USD) PSF Factored Returns 3 Year Investment Score North West 5.02% 5.61% 5.06% 1.25% 3.98% 5% 8% 3.50% 3% 2% 183 1.83% 15.60% 133 Central Manchester 6.13% 7.08% 9.03% 0.62% 3.98% 5% 8% 3.50% 3% 2% 242 2.42% 23.17% 188 North East 4.42% 3.84% 3.53% 1.26% 3.98% 5% 8% 3.50% 3% 2% 170 1.70% 8.69% 97 South 5.02% 6.75% 6.29% 0.83% 3.98% 5% 8% 3.50% 3% 2% 295 2.95% 18.93% 147 Trafford 4.89% 8.39% 7.24% 0.83% 3.98% 5% 8% 3.50% 3% 2% 320 3.20% 23.34% 168 Salford 5.65% 8.97% 9.73% 1.25% 3.98% 5% 8% 3.50% 3% 2% 211 2.11% 27.27% 206 Tameside 2.83% 6.00% 5.60% 1.26% 3.98% 5% 8% 3.50% 3% 2% 180 1.80% 10.32% 115 Bury 5.09% 5.94% 5.85% 1.25% 3.98% 5% 8% 3.50% 3% 2% 197 1.97% 16.79% 141
Manchester Micro-Markets Disclaimer This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the solicitation of an offer to buy any property. Information contained in the report, including projection, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Neither SquareYards, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Sources: Land Registry Data, Hometrack, Home.co.uk, Manchester Evening News