The UK property market has once again weathered a difficult year and is arriving into 2022 stronger than it has ever been. Property is a reliable investment, and future economic growth over the next 12 months ensures that house prices will continue increasing.
The national GDP began a rapid recovery in 2021 following a sharp coronavirus-induced contraction in 2020. More of the same is projected for 2022, with JLL predicting 7.6% annual growth which will see the economy return to pre-pandemic levels and then continue growing from there.
This growth will impact the housing market as a greater degree of available money leads more people to invest or buy a new home to live in. This will increase demand rapidly – but the levels of supply across the country cannot hope to match it.
According to government figures, at least 345,000 new homes are needed in the UK every year, but the most ambitious national targets can only deliver a maximum of 300,000 a year – and the actual number delivered in 2019-20 was just over 240,000, leaving a shortfall of 100,000 homes annually and putting tremendous pressure on the available housing stock.
In some city centre markets like Manchester this situation will be magnified, with a lack of housing supply in the pipeline and rises in demand which are far above the national average.
Reports from Rightmove demonstrate that Manchester’s rental market saw demand increase by 36% in the final month of Q3 2021 as people began returning to the city centre in large numbers. From the same report we can see that the average rent in Manchester is now notably higher than pre-pandemic levels, and similar reports from Alliance City Living show that record highs have been achieved for studio, two- and three-bedroom apartments in the city.
Now, JLL’s Residential Forecast 2022-2026 report shows that the good times are only just beginning for the Manchester property market.
Economic growth in the city of 16.4% over the next five years will fuel the local housing market and take it to unprecedented heights. By 2026, JLL predicts that Manchester house prices will increase 25.8% and the average rent in the city will go up by 15.4% - levels far higher than the expected national average growth over the that time period (21.7% and 12.6% respectively).
When trying to answer the questions ‘why invest in Manchester?’ this growth is the number one answer – and because it is caused by a lack of supply, it is not an issue that will be solved anytime soon.
According to the Deloitte Crane Survey, there are approximately 12,000 units under construction in Manchester which will be delivered by 2025. This sounds like a lot, and concerns about a potential oversupply were at their height in late 2020, leading some developers to pause their plans, particularly when it came to new tall towers in Manchester.
As can be seen from the above demand figures and growth predictions, this actually caused an even further shortage of new units in the pipeline – and that was before the increased demand caused by more people than expected moving back to the city centre.
Rather than there being an oversupply of units, there is in fact a significant undersupply which will only become more apparent over the next decade as a further 70,000 or more people move to Manchester. With that in mind, the predicted 12,000 properties that will complete in the next four years clearly will not even come close to meeting demand – leading to the increases in property prices and rents predicted by JLL.
All of this adds up to a high demand for property in Manchester which substantially outweighs both the available supply and what is in the pipeline for the future. For this reason, Manchester investment property is one of the best prospects on the market, and anyone looking at where to invest in 2022 should have the city at the top of their list.