If you’ve been reading about the Manchester property market, then you will probably have read that overall sales volumes have fallen over the past year, with flats being particularly hard hit. Some have speculated that this is the early indication of a property bubble which is about to burst, in actual fact, it appears more like a natural progression of Manchester’s development. This position is supported by these three points.
Manchester’s significant population growth is now easing to a more sustainable level
From the latter part of the 20th century right up to the second decade of the 21st century, Manchester was better known as a place from which people emigrated, even if only internally, rather than a desirable place to which to move. In 2014, however, the coalition government created the Northern Powerhouse Initiative and this not only stopped the slow decay of the north, but actually reversed it, leading to significant population growth, especially in Manchester.
More people naturally means a greater demand for housing and since Manchester’s growth was fuelled primarily by young adults (millennials) it’s understandable that the highest demand was for flats, which these incomers would either buy themselves or rent from a private landlord. While this growth is continuing and is projected to do so for several years, its pace has slowed and this has naturally led to a reduction in sales volumes, especially for flats.
Interestingly sales of terraced houses have only slightly dipped and sales of semi-detached properties actually increased, suggesting that those who arrived in Manchester as young adults (or who grew up there) are now moving into family homes rather than buying flats.
The Brexit effect is impacting all housing markets to some degree
Even though Manchester is well-placed to weather Brexit in whatever form it ultimately takes, the simple reality of human nature is that people will generally try to avoid making significant decisions (financial or otherwise) during a period of uncertainty.
This has been reflected in a slowdown in sales volumes across the UK, with some local markets doing better than others. For example, it’s common knowledge that the London property market, as a whole, has been stagnating for some time now as “the Brexit effect” has exacerbated affordability issues and shaken buyer confidence.
This southern slowdown may also have encouraged property investors to move their capital (back) down south, not because they have any concerns about Manchester’s long-term future, but because they want to have a property portfolio which covers as much of the UK as possible and hence want to make the most of this buying opportunity.
Volumes may be down, but values are staying up
Even though Manchester has experienced robust house-price inflation over recent years, property is still very affordable when compared not only to equivalent property in the Thames Valley area, but also to local wages. In short, it is a very good market in which to be a private, residential buyer. This means that even if investors move out, there is still a significant pool of local buyers to take their place.
Mark Burns in the managing director of Manchester-based estate agents Indlu.