House prices in the North West will increase by 18.1% in the next five years according to property advisor JLL, with growth in the region outpacing the rest of the UK in 2017.
The research, from its new Northern England report, was presented at a Manchester Residential Predictions Seminar in the city centre this morning.
According to the report, the property market in key Northern cities will be buoyed by high demand and low supply – resulting in growth in both rents and capital values, despite UK-wide uncertainty.
In Manchester, JLL is predicting capital values growth of 28.2% in the next five years. The average two-bed apartment in the city, which now fetches £230,000, will cost £246,000 by the end of 2017 alone, a 7% increase.
Rents in Manchester are forecast to increase by 20.5% by 2021. JLL said today’s renters can expect to pay on average £1,100 a month for a two-bed flat in Manchester city centre, with Liverpool rents costing £900 a month on average in the centre.
Manchester city centre has moved out of the price range of young professionals in recent years, newcomers to the city and graduates having to look to the suburbs to find affordable accommodation.
The data follows a strong year for Manchester’s residential sector in 2016, during which capital values grew by 15%.
JLL expects build-to-rent developments will soon be the mainstay of new schemes in Manchester and the city will be among the first choices for international investors targeting the UK’s Build to Rent sector.
In Liverpool, where two thirds of homes in the city centre are privately rented and half the population are young professionals, rents are set to grow 17.6% over the next five years. Meanwhile capital values in the city centre, forecast to grow by 22.8% in the same period, will outperform many other major regional city centres and Greater London (19.2%).
Leeds is set to see the largest increase in rents of any city in the UK over the next five years, with growth reaching 22.2%.
Stephen Hogg, head of North West residential at JLL, said: “Our five-year forecast points to the continued strength of the residential sector in the Northern Powerhouse. Manchester now offers some of the best returns in the UK and is at the forefront of the build-to-rent market in the UK regions.
“What’s more, growth in Liverpool, in part led by regeneration schemes like Peel Group’s £5.5bn Liverpool Waters development and the new £1bn knowledge quarter, is driving further interest from institutional investors. With values set to show significant growth, it also offers a good alternative for private investors given the lower entry capital required and the large number of renters in the city.”
According to JLL, Manchester requires 3,300 new homes each year, Liverpool 2,000 and Leeds 2,200 units, driven by forecast GDP increases.
Adam Challis, head of UK residential research at JLL, said: “Early indications suggest that political and economic uncertainty since the EU referendum vote has had a minimal impact on the residential markets across the North. While there has been a marginal slowdown in transactions and mild easing in prices, in markets where there’s still a significant undersupply we’re set to see growth over the next five years and the North West in particular is a prime example of this.”