Britain’s rental market is on the brink of change ─ and it’s the north-west city that holds the greatest opportunity for property investors.
There’s one city currently on the lips of UK property investors more than any other.
Manchester is already firmly established as the most popular investment location in Britain right now. It’s home to the highest average yields and a population that’s grown by three times the national average over the last 10 years.
But the level of investment that’s already been made barely scratches the surface of what Manchester needs. The city has one of the lowest levels of housing supply anywhere in the country, despite the huge growth in the number of people that now call Manchester home.
One demographic in particular has felt the pinch more than any other. Manchester’s population already has a high density of young people, and it’s estimated that 89% of the growth in new inhabitants expected by 2025 will be made up of Generation Y. Add in 20,000 graduates that decide to stay and work in Manchester every year, and it’s clear that Manchester is a young city looking for somewhere to live.
And, for investors, this creates a huge opportunity.
Generation Y does not equate success with homeownership. While some renters aspire to be homeowners, there’s a significant proportion of the 20 million tenants in Britain that actively choose to rent their property. Generation Y prefer the flexibility renting provides. They prefer to live in dense urban environments, positioned in vibrant neighbourhoods surrounded by people with shared interests and values.
Traditionally these tenants resorted to buy-to-let. For 20 years it was a product that provided a solution; rental accommodation for those that wanted it. But buy-to-let is broken. No longer do tenants want to live in homes originally intended for the owner-occupied sector. No longer do they want to live in areas on the outskirts of town, on streets made up of a cross-section of demographics. The government’s move to increase the stamp duty levy on buy-to-let homes heralded a need for change.
Build-to-rent is that change. The natural evolution of buy-to-let, build-to-rent developments comprise properties originally constructed specifically for the rental market. Developments in city centre locations within vibrant communities. Knight Frank believes the build-to-rent sector will be worth £50 billion by 2020, as the focus now turns to the asset class for the 21st century tenant.
In Manchester, city targets highlight a need for 4,000 new build-to-rent units each year to cope with the volume of demand from its huge numbers of Generation Y workers. But with just 1,471 build-to-rent units in the pipeline, the time for investment in the north-west is now.
Select Property Group has published Investing in Manchester: Why is Manchester at the heart of the UK’s build-to-rent revolution?, a whitepaper that analyses the evolution of buy-to-let into build-to-rent and why Manchester is the city needs this new product more than any other. Click here to download.