Over the last 20 years, Manchester has outperformed all other UK cities in respect to capital growth from property. New research indicates the city will continue to be the UK’s top performing city.
In 2002, the average Manchester property was valued at £48,845. Since that date property prices have grown at an astronomical rate. Today the average value of a Manchester property sits at £210,647. This represents growth of over 330%.
London too expensive
In recent years, London and now the southeast have cooled significantly. This is unsurprising with the average property in London well over £560,000. This valuation rise to over £700,000 according to Rightmove’s metric. Though Rightmove values property by looking at the average value of the property listed on their site and not on sales at the land registry.
Even taking the lower valuation, many people are now priced out of buying property in London and the surrounding areas. As a result, many property investors are seeking alternative cities to invest in for growth. This strategy makes sense due to the increased costs of entering the UK property market as a buy-to-let investor.
Stamp duty costs
In 2014, the government recalculated the way it charged stamp duty. Previously, this tax was far less obstructive to buy-to-let investors. In 2013 if you bought a house for £250,000 you would have paid only 1% of the value of the property. This is despite properties being priced at a lot lower level. Today, as a buy-to-let investor you are subject to a 3% surcharge in addition to a 2% charge on the threshold over £125,000.
More importantly, stamp duty is now a progressive tax meaning that as the price goes up you pay tax at a higher rate. With this in mind, investing in London and the south the situation is far worse from a tax perspective. This is because as a buy-to-let investor you are paying 8% on any value above £250,000. So investing in a £560,000 property results in a £34,800 stamp duty bill.
With affordability in London very low it is difficult for tenants to pay landlords such high prices. This combined with first-time buyers being priced out of the market, property investors are looking at other areas to invest in for growth.
Manchester the top performing city
Manchester is the ideal solution for property investors. This city has enjoyed a huge upturn due to inward investment. As such the city boasts the four tallest buildings outside of London. Many companies have relocated to Manchester as many young professionals are seeking to live there due to a high quality of life compared to London where they simply can’t afford to live.
Many property investors have identified this trend, and they see the city as a mini London of 10-15 years ago, where there is huge upside potential. this is why many investors believe Manchester will continue to be the UK’s top-performing city for property investors
Whilst other cities have performed well, they lack the prestige of Manchester. Liverpool and Leeds for example have shown tremendous growth of late, but both cities are in Manchester’s shadow. This is because Manchester is now positioning itself as the UK’s second city by rivaling Birmingham.
Liverpool scams and stalled developments
Liverpool particularly has its problems from an investment perspective. This is due to the way the government has awarded contracts to developers in the city. Looking at the number of fraudulent development schemes that have hit the city in recent years, investors should avoid most off-plan developments in the city like the plague.
https://www.liverpoolecho.co.uk/all-about/stalled-developments
The above link relates to several stalled sites which have cost investors hundreds of millions of pounds. The Liverpool Echo is the city’s flagship newspaper and is committed to cleaning up the city from often fraudulent developers. The paper reported last year that there were 39 stalled developments, with the problem on a huge scale. Many developers have been under investigation by the Serious Fraud Office.
Last Year, Mount Group Student Natex, an SPV attached to developer Mount Property Group, collapsed midway through delivering the 574-unit student development on Norton Street. The Liverpool-based company owes a total of £39m to creditors, according to an administration report by Mazars.
This is the tip of the iceberg with the likes of North Point Global and Primesite having several collapsed schemes followed by ensuing fraud investigations.
That being said, there are some very good off-plan options in Liverpool. RW-invest for example has an almost 20-year track record and over £1 billion of funds successfully invested for off-plan projects. As an ethical company, they are committed to offering clear and transparent advice to a high standard. They cover both Liverpool and Manchester and have a very good reputation in the industry.
How to invest
For investors seeking to take advantage of Manchester’s property potential, we recommend two distinct strategies. For investors who are looking for capital growth and are prepared to take financial risk then off-plan is the way. However, you must do due diligence on any developer to ensure that they have a successful track record of completed projects coupled with a robust balance sheet.
For more cautious investors or one who are looking more for yield, the HMO conversions are the investment of choice. This type of investment offers more security as the property already exists. The yield will be high as you are gaining an income from each room. Furthermore, there are now schemes that offer long-term rentals to a local authority. This provides both rental stability and a high net yield as there are no maintenance costs. If you would like to know more then contact a member of our team.