01/11/2018 by Robin Gregson
Salford and Greater Manchester
Central Manchester is often regarded as one of the UK's prime property investment destinations, but this summer, research published by local estate agents found that property prices in Salford had risen even more sharply than in its neighbouring city. The data showed that average prices in Salford had grown by 38% over the three years to June 2017, with Manchester four points behind at 34%. This sustained growth in prices might lead some to suspect that the best window of opportunity has closed, but while latecomer investors might gnash their teeth at having missed out on three successive years of above-average capital growth, Greater Manchester as a whole remains an attractive proposition. Many of Britain's biggest university cities - particularly those in the Midlands and the North - are still regarded as 'best buys' for landlords. Birmingham, Liverpool and Greater Manchester all feature strongly in the 2018 list of the most popular investment destinations, and a glance at the numbers shows why.
In Greater Manchester, market sentiment is still very positive. Research published by Zoopla in 2018 found that homeowners expect their properties to appreciate by nearly 7% over the course of the next six months. Moreover, rising prices don't appear to have put much of a dent in the ability of local properties to deliver healthy yields. Local estate agents figures suggest that average yields in both Salford and Manchester stand at around 5.3%. As the Manchester Evening news recently reported, these returns, combined with capital growth, are helping to realise total annual returns of between 11% and 20%.
This combination of fast rising values and healthy yields is rare, running almost counter to conventional wisdom. Normally, rising prices tend to erode net yields for new investors but in the case of Salford and parts (at least) of Greater Manchester, rental returns are keeping pace. This is thanks largely to massive rental demand, which is sustained by a number of important factors.
Drivers of rental demand:
The most notable of these factors is sustained economic growth; both Salford and Manchester are seeing relentless investment on the part of major employers and office builders, and this is fuelling demand for larger workforces. Incoming employees naturally require places to live and so strong competition continues amongst tenants for good quality professional accommodation.
Sentiment also plays a big part. In the case of Salford, the city's self confidence has been buoyed up by the creation of Media City, which is home to prestigious employers including the BBC, ITV Granada and Salford University, as well as a host of small digital media businesses. Other big businesses such as Kellogg's and Ericson also operate here. This has all contributed to a mood of economic optimism, as has the steady inward migration of well paid creative and technical professionals.
Importantly, this interplay between university and employers is helping to sustain new career opportunities in communications, broadcasting, IT and the digital industries. As a result, Salford has been able to hold on to much of its graduate talent. Rather than lose the bulk of its most qualified young people to the former honeypots of London and the South East, Salford is retaining more than half of all its university leavers. This, in turn, is helping the city to build a strong academic / knowledge base that is underpinning the growth of numerous high value industries. It is all part of a virtuous circle that could well support economic growth for decades to come.
More generally, the University of Salford is a major employer in its own right, and it has a student population of approximately 20,000. This inevitably helps to maintain healthy rental demand outside of the higher-end market, and with graduate retention rates being what they are, the University has become an important driver of local population growth.
However, it would be a mistake to consider Salford's property market as a single entity. Like anywhere else, prices and potential returns for investors vary considerably between neighbourhoods. This was illustrated in June this year when the Manchester Evening News published details of average asking prices by postcode, as compiled by a local estate agency. These figures identified a pronounced difference in affordability across four different areas of Salford, ranging from a little over £166,000 in Salford's M6 postal district, to £232,000 in M3, where Salford borders Manchester.
This disparity in prices creates opportunities for investors with different budgets. With many industry professional expecting continuing growth, it's possible that the lower priced properties might deliver the best of the city's yields, but it's important to do the proper research. Some areas of Salford remain economically depressed and it's by no means a sure thing that a cheap apartment will equate to a strongly performing investment.
That said, there are certainly good deals to be found, and the city as a whole has undoubtedly fared well since the turn of the century. In 2000, average prices in Salford stood at £42,271, whereas now that figure has risen to £156,190 across the whole of the city's postcodes. This data, based on Land Registry statistics, means that average values have risen by 270% since the year 2000. This is a faster rate of appreciation than has been achieved anywhere else in the north of England.
Figures vary by source but the underlying message is unmistakeable: Salford is a property market that is continuing to deliver some excellent results for investors.
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