Manchester Cathedral is one of the city’s oldest buildings.
Manchester is fast becoming the next major investment destination for foreign property buyers looking to benefit from strong capital growth and an undersupply of housing.
By Romesh Navaratnarajah
Recent news reports about Britain’s potential split from Europe, commonly referred to as Brexit, have left many foreign property investors wondering if this is the right time to enter the UK property market.
There are many arguments being made by opponents of Brexit, but one thing is clear: a Brexit vote will likely cause a sharp fall in the Sterling, which should make UK properties much cheaper for overseas buyers.
Aside from London, another location expected to attract greater foreign investment is Manchester, the UK’s second city. Alex Bellingham, Director of IP Global, told PropertyGuru that its housing market is currently undervalued, making it a more affordable alternative to prime central London.
He shared that property prices in Greater Manchester remain 13.6 percent below their pre-recession peak, and forecasts put price growth to 2019 at 20 percent.
Chinese influence
Capitalising on growth opportunities, Chinese investments have been flowing into Manchester in recent years. China’s President Xi Jinping even stopped over on a whirlwind tour of the UK last October, cementing bilateral ties.
Several massive deals have been secured, including a British-Chinese joint venture to develop an £800 million airport development, one of the most significant in the UK since the 2012 Olympic Park.
Dubbed Airport City, the project will add five million square feet of offices, hotels and advanced manufacturing and logistics businesses, creating around 16,000 jobs, said Bellingham.
Separately, Chinese investors have splashed £265 million to buy a stake in the Manchester City Football Club.
Economic power
In a bid to boost prosperity in the North of England, the UK government unveiled the £7 billion Northern Powerhouse project in 2014. The scheme aims to improve transport links between the cities of Manchester, Liverpool, Leeds, Sheffield and Newcastle, creating a regional economic power.
The project is expected to strengthen Manchester’s economy, which has been outperforming the rest of the UK, noted property consultancy JLL.
“Generating over £56 billion in GVA (gross added value), the Manchester City region contributes 52 percent of the North West’s total economic output,” said Stephen Hogg, Lead Director, Regional Residential at JLL Manchester.
He added that the city has a well-educated and skilled workforce of 1.4 million and a GDP of £28 billion.
Nowhere is the economic boom more evident than in Spinningfields, an area within downtown Manchester that has grown in size and influence. According to Bellingham, the area offers work spaces for over 20,000 employees. At the same time, revenue from retail and entertainment businesses shot up by 400 percent between 2008 and 2014.
Transport hub
Manchester Airport is already a well-connected air hub with direct flights to major cities in Asia, such as Hong Kong, Singapore and Beijing, said Bellingham.
Currently, the airport has capacity for 22 million passengers, but this is expected to reach 50 million by 2030 once the area around the airport is developed, Hogg said.
Furthermore, plans for a high-speed rail link by 2033 will cut down travelling time between London and Manchester to just over an hour, and is expected to promote economic growth and create more commercial opportunities.
Artist’s impression of the completed Airport City.
Housing challenge
The strong push for development means that demand for housing units has outstripped supply. Between 2010 and 2015, the number of housing completions per annum averaged just 4,500 units. This is less than half of the 9,600-plus new units required each year to meet demand, noted Bellingham.
“Usually, when supply is not set to meet demand, it creates an imbalance which drives property prices up, and that is why investors are looking to capitalise on Manchester at its current low price point.”
Due to the lack of supply coming into the market over the past few years, JLL has observed an increase in capital growth of 2.6 percent in 2013, 6.3 percent in 2014 and 9.5 percent in 2015.
The smaller, the better
Bellingham revealed that smaller one- and two-bedroom apartments in the city tend to be more popular with foreign investors, especially in areas with good connectivity to major employment hubs. “They are a hassle-free option.”
In fact, he doesn’t foresee landlords having problems finding tenants, or trouble managing properties from abroad.
Reflecting the strength of the rental market, HSBC voted Manchester as the best buy-to-let location in the UK. Recently, rental yields have been hovering around five to seven percent, said Bellingham.
“Many Asian investors have turned towards Manchester instead of London because of a recent trend of higher return on investments.”
Buying process
For Singaporeans, purchasing an apartment in Manchester is easy as they can secure financing from both local and UK banks.
Hogg noted that there’s a reservation fee to hold a property, which typically costs £2,000. After the details have been agreed to, there is a 10 percent deposit on exchange of contracts, the stage at which a property sale becomes legally binding on both sides. Subsequently, there is a further 10 percent deposit on the one-year anniversary of the exchange date.
Areas of opportunity
While there are pockets of value around the city, Bellingham believes investors should focus their attention on the downtown area.
“The city centre is close to both the financial centre and the central transport infrastructure, making it an ideal setting. Currently, prices are low and growth is rising,” he said, adding that Manchester United legends Gary Neville and Ryan Giggs are also investing there.
Both footballers are working on a joint venture to convert the historic Manchester Stock Exchange building into a 35-bed hotel, with a basement gymnasium and spa.
Hogg reckons another hotspot is MediaCityUK, which is being marketed as the digital hub of the north and home to BBC North, ITV and Salford University. “This area is due to double in size over the next 10 years and will feature commercial, residential, retail and leisure development.”
CITY FAST FACTS
(MANCHESTER)
Population: Approx. 524,000
Total area: 115 sq km
Currency: British Pound
GDP per capita (UK): £29,783
GDP growth (UK): 2.0 percent in 2016
Future transport: Planned high-speed railway linking London to Manchester
Average home prices in city centre: £240 psf
Distance from Singapore: 10,932 km
INTERNATIONAL HIGHLIGHTS
The Lightbox and Rivergate House are two new-build developments near the Manchester city centre that have been attracting overseas investment.
NEW PROJECTS
Lightbox, MediaCityUK
Manchester, UK
Type: Apartment
Developer: Peel Group
Tenure: 250-year leasehold
Facilities: 24-hour security, dental clinic, shops, private members club
Nearby Key Amenities: Lowry Outlet Mall, Old Trafford, Imperial War Museum North
Nearest Transport: MediaCityUK Metrolink station, Manchester Airport
Starting Price: £134,000 (S$264,070)
Lightbox is a new residential block within MediaCityUK, a 200-acre mixed-use development in the heart of Manchester, the UK’s second city.
Developed by the Peel Group, the 19-storey building features 238 one-, two- and three-bedroom apartments. The plush interiors offer a high level of specifications, including contemporary-styled bathrooms and kitchens.
The modern building boasts breathtaking views of the waterfront, MediaCityUK, and Manchester’s skyline, including the Imperial War Museum North, Lowry Arts Centre and Old Trafford, the home stadium of Manchester United Football Club.
Set to be completed in early 2019, Lightbox was launched to Singaporean buyers in May, with prices starting at £134,000 (S$264,070).
Rivergate House
Manchester, UK
Type: Apartment
Developer: Renaker Build
Tenure: 249-year leasehold
Facilities: Car parking, 24-hour concierge service, shops
Nearby Key Amenities: Retail outlets, restaurants, hairdressers, a gym and spa
Nearest Transport: Deansgate-Castlefield and Oxford Road Metrolink stations
Starting Price: S$310,346
Rivergate House at Wilburn Wharf is an exciting new waterfront residence located just minutes away from Manchester city centre, and a short walk to the Spinningfields business hub.
Developed by Renaker Build, it forms the first phase of a luxury waterside development around the historic Wilburn Basin.
Set to be completed in the third quarter of 2016, Rivergate House features spacious one- to three-bedroom apartments.
Boasting high-quality specifications and finishings, all units are decorated with white emulsion walls, while kitchens are equipped with refrigerators, automatic dishwashers, integrated electric ovens and ceramic hobs. The development also comes with a 24-hour concierge service.
Rivergate House is within walking distance to various high street shops such as TK Maxx and Boots. The development also contains 2,464 sq ft of ground floor commercial space.
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