Since its beginnings in 2014, the Northern Powerhouse project has coincided with cities in the North experiencing rapid growth. This government-backed initiative has raised the profile of the region and helped improve its economic prospects significantly – and the housing market has grown at the same time.
It is now a common sight to visit a city such as Manchester and see a skyline filled with cranes as more and more Northern property developments rise out of the ground every year. But what exactly is going on in the Northern Powerhouse that makes it such a prime investment opportunity?
A number of factors combine to answer the question: Why invest in the North?
Economic growth leading to rapid house price rises
The underlying foundations of the Northern Powerhouse’s success as a prime investment opportunity lie in the rapidly growing economies of its most important cities. For many years, London had its own gravity and people from across the country were drawn to the capital city for the unique job opportunities and lifestyle on offer. That is no longer the case – Northern Powerhouse cities are asserting themselves and balancing out the pull of London.
The perfect example of this is Manchester, a city which has become the UK’s de facto second city thanks to its remarkable economic growth.
The city centre economy is worth more than £6bn annually and employs more than 150,000 people – 10% of all employment in the region. Overall growth of 4.3% a year puts Manchester far ahead of the UK average (3.6%) and gives the city a solid platform to continue attracting new businesses and young professional workers.
Manchester is already one of the tech capitals of Europe and can boast companies such as Amazon, Google, The Hut Group, the BBC and many more who have chosen to make the Northern city their home.
“I am delighted we’re opening our first corporate office in the North of England today,” said Doug Gurr, UK Country Manager at Amazon.
“Manchester offers an incredible talent pool, a thriving hub of fast-growing UK tech start-ups and is a centre of academic and intellectual excellence.”
Inevitably, this has a knock on effect on the housing market. More people coming to Manchester means more demand and competition for the best housing – especially in the busy city centre market. This pushes prices up and contributes to Manchester seeing annual growth of 7.4%.
Ronald Garrett, Managing Director at Alliance Investments, said: “In the last five years we have seen Manchester step onto another level in terms of economic growth. Barely a week goes by without another exciting new announcement which makes the city even better.
“Property prices have followed the city’s upwards trajectory and made it one of the UK’s premier markets. Manchester leads the North and the Northern Powerhouse is the UK’s number one housing market – it is hard to overstate the opportunity on offer in Manchester and other cities like it.”
This is just one example of how rapid economic growth in the Northern Powerhouse is leading to a prosperous property future in the region – and there is a lot more to come. Savills is predicting a further 28% average house price growth in the North West by 2025 due to the economic growth happening in cities like Manchester.
Range of markets suitable for all types of investor
The Northern Powerhouse is home to a whole range of booming markets which all offer something different. This diversity has created momentum as investors of all types are able to find the perfect property to suit their portfolio and don’t have to look elsewhere. Two excellent examples of this are Altrincham and Preston.
Altrincham is Manchester’s most desirable suburb and was voted the best place to live in the North West and the UK in consecutive years by the Sunday Times. Described as “utopia” and a “super suburb” by the paper, Altrincham offers a completely different investment opportunity to the nearby Manchester city centre market, but without investors having to sacrifice on long-term profitability and stability.
Located just 30 minutes from central Manchester by train or tram – and only a short journey from Manchester Airport, the town is ideal for professionals and families alike who take advantage of the ideal location between town and country. With four OFSTED-rated "Outstanding" schools, Altrincham has seen an influx of residents looking for a town that balances buzzing restaurants and cafes with tranquil green spaces like the National Trust's Dunham Massey.
Preston on the other hand is the epitome of an up-and-coming city centre which is right at the start of what is set to be a phenomenal amount of economic growth in the coming years, but still offers a below-average entry price. Thanks to a package of private and public sector deals, the city is experiencing a ‘once-in-a-lifetime transformation’ that’s set to level-up its social and business infrastructure with a total forecasted growth of £1bn over the next decade.
The city is home to world-class international businesses and attracts some of the UK’s best talent with the high quality jobs it has on offer, including many from the University of Central Lancashire and beyond. With enviable transport links, established business and education hubs and a clear path for sustained growth, the city has an exciting future ahead as both a place to live and invest.
Chris Holland, Director of Sales and Lettings at Preston-based developer The Heaton Group, said: “The Northern Powerhouse is the place to be right now and Preston is a perfect example of that. Property values and rents are rising because the city is booming – this is a place where people are excited to live and work. With all the ongoing investment it’s clear that this is only the beginning of the cycle and there is much more to come.”
The Northern Powerhouse offers far more than expensive city centre properties. No matter who you are or what you are looking for, the North is sure to have the perfect addition to your portfolio.
Strong rental markets
The UK’s strongest rental markets can be found in the North of England. As the London market continues to fade, rents are rising fast due to population growth and economic development in cities like Manchester.
Average rents outside London reached more than £1,000 for the first time in Q2 2021 according to the latest Rental Price Tracker from Rightmove. That figure represents a rise of 2.6% in three months and 6.2% over the last year – strongly impressive figures which reflects record tenant demand and unprecedented competition for the most desirable homes.
When you focus in on the North, the picture gets even more impressive. The North West in particular is an excellent example of how strong the Northern property market is. Rents in the region have risen by 6.9% and much of that growth is concentrated in city centres. The likes of Manchester and the aforementioned Preston are the UK’s leading property hotspots and the centre of the Northern Powerhouse’s prosperous property future.
To take Manchester as an example, the latest Quarterly Market Report from Alliance City Living shows the scale of rental demand in the market right now. Recently-released figures from the lettings and property management agency show that lettings in Q2 2021 were up 139% over 2020 and 67% over the same period in 2019 – showing that demand has increased by two thirds over pre-pandemic levels in the city.
This is due to a growing population and an ongoing lack of stock that are combining to push demand upwards and make Manchester a prime property investment market. Even Manchester’s booming construction market – not to mention its abundance of tall residential towers – cannot keep up with demand, and it is estimated that there will be a shortfall of at least 50,000 homes in the city by 2025, based on population estimates from the Manchester City Council Forecasting Model.
Nadia Aghtarafi, Lettings Manager at Alliance City Living, said of the Manchester rental market: “We have seen enquiries for properties in Manchester go through the roof in the last year. In particular, high-end luxury properties are more in-demand than ever before as people look to get more for their money and get the most out of living in the city centre.
“Additionally, we have noted that more prospective tenants are interested in two bedroom properties which offer space for a home office. We anticipate that the trend towards hybrid and home working will work in favour of investors who have purchased properties with an extra bedroom providing tenants with more space.”
The Northern Powerhouse regions are the UK’s premier property hotspots, with all indications pointing to this becoming the new normal in the future. Northern property investment has never been more favourable for landlords – making this the perfect time to invest and secure stable, long-term returns from your portfolio.
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