We last featured Salford buy to let in this blog a little over a year ago. We pointed out then that average property prices in the city had risen at an astonishing rate, faster even than central Manchester, which - at the time - was regarded as Britain's number one hotspot for investment.
Much has changed since November 2018 so in this post, we thought we'd examine how the local property market is now faring and whether Salford still deserves to be ranked amongst the country's favourite buy-to-let destinations.
To answer that, we spoke with one of our in-house investment advisers, Jason Guest.
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Q. So Jason; last year, we were seeing the Salford buy to let market producing some amazing figures - double digit price growth, and average yields of over 5%. This year, the UK housing market has been a lot more subdued, and people have generally acknowledged that as more investors have flocked to Greater Manchester, so prices have risen and good yields have been harder to achieve. Has Salford buy to let gone off the boil?
A. No, I don't think it has. It's certainly true to say that the UK property market in general has been slower over the last twelve months, and nowhere is seeing the sorts of results that Salford and central Manchester were seeing between 2016 and 2018. However, it's probably fair to say that the Salford buy to let market is still one of the best performing markets in the country.
A lot of that is down to the huge amount of investment and regeneration taking place in and around Salford Quays. It's happening on such a massive scale that it isn't just boosting the property market in Salford; many people believe it's one of the main drivers of growth in neighbouring Manchester, too.
This regeneration began a few years ago when the BBC, and later ITV, set up major studios here. Since then, large numbers of technical, creative and digital media businesses have relocated in Salford - most of them sustaining highly skilled and relatively highly paid jobs. That has poured more money into the local economy and piled on demand for good quality rental accommodation.
And importantly, that growth is continuing. There's no end in sight to the investment; major employers such as TalkTalk are moving in and planners have also given the green light to the Port Salford project, which will see the construction of a huge inland waterway port. It's going to create new jobs and inject new money into an already thriving economy. The road improvements alone are going to be worth £50 million, and that's to say nothing of the public and private sector investment going into new warehousing and new rail and marine connections.
Economically, all the signs are that Salford is going to remain exceptionally strong over the coming years. It's likely to see more money coming in, more employers, and more people taking new jobs. These are all good indicators for property investors because they all point to greater demand for accommodation, and more prospective tenants with more money to spend.
Q. But presumably you'd agree that we probably won't see the same sort of price growth and yields that we saw a couple of years ago?
A. Well, yes and no. It's probably fair to say that price growth is bound to slow. The national economic outlook has been particularly uncertain lately, and the global market has also been relatively subdued, so it would be unrealistic to expect capital growth to continue at the rate it did a couple of years ago. Over the previous three years, prices rose in Salford by a total of 33% and no one is seriously forecasting 11% annual growth, either in Salford or anywhere in the country. To put it in context, the ONS reports that prices in the UK grew by an average of only 1.3% in 2019, and by only 1% across England.
However, prices in Salford have still produced one of the country's most impressive growth rates; the government's House Price Index Report for England, published in November 2019, says that average values in Salford rose from just over £160,000 to nearly £171,000 this year, which equates to an increase of 6.7%. That's obviously not as high as in 2018, but it's way ahead of the rate of inflation and there really are very few local authority districts that do better than that.
Q. And what about yields?
A. When it comes to yields, things look even better. Over the last five years, average rentals across England have risen by about 16% but in Salford, the figure has been closer to 38%. Last year, we reported that average annual yields in both Salford and Manchester were standing at around 5.3%. This year, many commentators are quoting very similar figures - ranging between 5.0 and 5.5% - but in our experience, a well-chosen property in Salford will do considerably better than that, yielding anything between 6.5% and 7%.
Q. So what sort of properties are generating yields like that?
A. In Salford, we've been handling a number of re-sales lately, where investors can pick up a ready-tenanted rent-paying property that's only about two to four years old. They're typically yielding 7% and they're usually quick to sell, not least because they represent a very safe investment. They come with a proven track record and, in most cases, they've only ever had the one steady tenant. The attractions of that are obvious: a minimal risk of voids, together with an immediate and predictable return.
This sort of property is proving very popular, in the UK and overseas. I've been to two property investment events in China this year and even the buyers who had next to no knowledge of the UK market had heard of Manchester and Salford, and they were interested in buying property there.
Many investors will simply want to take over a tenanted property and let it run as before. Others are interested in managing local properties as short term lets or even as serviced apartments. There's a strong short-term rental market in the city. That's partly because of all the business visitors coming and going, together with a growing tourist market, and all the parents, businesses and academics who need accommodation when they're visiting Salford University. These short-stay visits can generate much higher rental returns, assuming that the properties are adequately marketed.
Q. Looking further ahead, would you expect Salford buy to let to remain a 'safe bet' for investors?
A. Yes, I would. You can never know the future, of course, but you can certainly read the signs, and in the Salford buy to let market, they all point in the right direction. You've got a really strong economy, loads of investment going on, new infrastructure improvements, and a steady influx of major employers. Demand for tenancies is strong and average rental returns are increasing steadily. You can't ask for much more than that.
More generally, it's located in a region that's a clear favourite amongst property industry commentators. The North West is generating the UK's highest average yields - somewhere over 6% according to recent figures - and comparatively low asking prices mean that the market has more room for price growth. According to a report published by Savills in November 2019, the company expects average property prices in the North West to grow by 24% over the next four years.
Whether or not the regional market grows that quickly, I think it's still fair to assume that the Salford buy to let market will continue to be one of the country's strongest market performers in terms of both yield and capital growth.
We've already talked about yields and rental demand, but it's also worth pointing out that price growth looks set to remain strong. Zoopla recently published a report into the typical differences between asking prices and actual sale prices across England and Wales. These two figures can often be considerably different, but a narrow gap can usually be interpreted as a sign of healthy buyer demand and a buoyant property market. The report found that properties in Salford typically realised the full 100% of their asking price; a feat that was only matched by two other towns in the whole of the country.
Q. Thanks Jason. Any final thoughts?
A. Well, just the usual word of caution. We say this a lot but it's always worth emphasising: we're talking here about average figures for Salford - a whole city - and just because the city-wide averages are very good, it's not necessarily the case that any particular property will perform well. As ever, finding a good one is a matter of doing your homework; seeing how well a particular property meets local market demand. It's a decision that demands careful research, and if anyone needs support with that, we're always ready to help.
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If you have questions about property investment options in Salford or any other UK destination, please call one of our advisory team on 01244 343 355.