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UK government’s ‘Northern Powerhouse’ scheme is driving property boom in thriving Manchester, Liverpool

High rental yields, job creation and population growth are making the UK’s great northern cities property investment hotspots for overseas buyers

PUBLISHED : Tuesday, 11 October, 2016, 2:31pm
UPDATED : Tuesday, 11 October, 2016, 7:43pm

Property in Manchester and Liverpool is seeing an investment surge despite predictions of slowed growth following Brexit.

Indeed, property prices nationwide have shown resilience following the EU referendum, rising 5.6 per cent on an annualised basis in August, up from 5.2 per cent in July. It is now clear that the government’s ‘Northern Powerhouse’ strategy, to boost the economic growth of the North of England, is continuing to advance under the leadership of new Prime Minister Theresa May.

Investors with an interest in UK property will long have been aware of the excellent market conditions in Manchester, but increased links with China are bringing the city to the attention of a new generation of potential buyers.

Known as the ‘Capital of the North’, and once nicknamed Cottonopolis for its leading role in the Industrial Revolution, Manchester has a lot to interest property investors. Its economic performance, its position at the centre of the ‘Northern Powerhouse’, and the supply-demand imbalance in housing are all key structural factors, but most important of all is the exceptional value investors can find there.

Manchester and Liverpool offer very attractive rental yields, and with demand expected to increase significantly over the next five years we are confident this trend will continue

Above all, though, it is the booming economy that is driving the city’s investment case. Greater Manchester’s gross value added, a measure of the value of goods and services produced in an area, is now higher than that of the Northeast, West Yorkshire or Merseyside, and is forecast to grow 32 per cent to £75bn by 2024.

All importantly for property investors, there is a considerable and growing supply and demand imbalance in the city’s housing. Over the next decade Greater Manchester’s population is expected to increase by 128,000, and it is thought that 110,000 jobs will be created over the same period. What’s more, there will be a 14,000 reduction in manufacturing jobs alongside a 31,000 increase in professional, technical and scientific roles, meaning that Manchester workers are moving into higher wage brackets. All this comes against the backdrop of a supply shortfall that cannot be met, ultimately pushing prices up.

The city, currently the strongest UK property market outside of London, offers one of the highest rental yields in the UK at up to 6.8 per cent, according to LendInvest. Employment is forecast to increase by 4.3 per cent over the next five years which will continue to fuel the lively residential market, where demand from the 2.5 million strong population already significantly outweighs supply.

Liverpool is fast becoming another investment hotspot for buyers from China, Hong Kong and beyond. The city celebrated its 800th anniversary in 2007, and in 2008 was famously named European Capital of Culture. The economy of the city has been growing strongly since the mid-1990s, with its Gross Value Added growing 17.8 per cent between 1995 and 2006. Recent years have seen significant growth in Liverpool’s knowledge economy, with the establishment of the Liverpool Knowledge Quarter, but public and private sector service industries remain at the centre of the city’s economy – the second-largest regional economy in the North of England.

Average private rents in the city were up by 11 per cent in 2015 and are expected to increase by a further 22 per cent before 2020. The 66,000 students studying at the city’s five universities, and its thriving hub of 500,000 businesses, have fuelled demand, with rental yields for investors currently standing just behind Manchester at 6.56 per cent, according to HSBC.

Importantly for property investors, there is a considerable and growing supply and demand imbalance in [Manchester’s] housing

The positive outlook for the Northern Powerhouse follows new Prime Minister Theresa May’s confirmation in August that she will press ahead with former Chancellor George Osborne’s plans to boost infrastructure and devolve power to individual cities. There had been speculation that May might not follow the same path, but she has since laid out her ambition to “help the great cities and towns of the North pool their strengths and take on the world”.

For investors from Hong Kong and China, Manchester and Liverpool offer very attractive rental yields, and with demand expected to increase significantly over the next five years we are confident this trend will continue. The Northern Powerhouse vision has already delivered strong results with over 8,000 new jobs created over the past four years and an estimated 850,000 more to be created by 2050.

What’s clear is that, despite any initial apprehension following the vote to leave the EU, the UK and the Northern Powerhouse cities in particular still present a safe haven for overseas property investors, and one that is increasingly attractive given the weaker pound and interest rate cuts.

Jonathan Gordon is a director at IP Global

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