Manchester rents have been on a steep upward slope in recent years—but how long can this rapid price growth continue?
The findings from the Royal Institution of Chartered Surveyors (RICS) are unambiguous: rental demand is showing “no signs of slowing down,” and supply is struggling to keep pace. Furthermore, 63% of property experts anticipate a surge in rents over the next quarter. Such predictions surpass records held since 1999.
Manchester Rents Already on the Rise
According to Manchester Council’s most recent economic analysis back in May, the median monthly cost for a two-bedroom flat stood at £1,279. The imbalance between demand and supply, exacerbated by the ongoing cost of living crisis, has led to a 3.3 per cent surge in city centre rental prices in the first quarter of 2023.
Meanwhile, rental costs in the outskirts of the city have likewise risen, says the council, marking a 4 per cent increase compared to the previous quarter. Nonetheless, renting a two-bedroom property outside the centre is relatively more affordable, with an average monthly cost of £987.
In addition, Zoopla reports that the city’s year-on-year rental growth as of June 2023 has reached 13%, the highest figure in England outside London. It is also approximately 3% higher than the North West as a whole, which has been one of the UK’s strongest regions for rental growth for many years.
Lack of Properties Drives Rental Demand
The continued drop in new buyer enquiries, as reported by RICS, is a testament to the economic headwinds prospective purchasers are up against—rising interest rates, a volatile economic atmosphere, and stringent credit conditions.
Property professionals report dismal figures—45 per cent indicate falling new buyer enquiries and 44 per cent note a decline in agreed sales, a nadir not seen since the beginning of the pandemic.
This, in turn, is impacting the number of available lettings properties. Dan Wilson Craw, Deputy Chief Executive of Generation Rent, articulates the gravity of the situation:
In many cases, tenants are being priced out of their homes and forced into the lettings market to compete for a new place to live. At the same time, a lot of people who want to move can’t because rents on new tenancies have risen so rapidly. That has a knock-on effect on the number of homes coming onto the market.
In addition to this, those looking to take their first steps onto the property ladder are increasingly staying put as rents rise and mortgage rates remain high.
Mortgage Rates in the Near Future
In a surprising move, major mortgage lenders, including HSBC UK, have recently reduced rates despite a backdrop of economic volatility. This comes amidst indications that high inflation rates are beginning to ease. The Bank of England utilises changes in the base rate, which directly influences borrowing costs as a measure to control inflation.
Manchester: A City of Strong Demand
While in the short term, rental costs are set to rise, it may be the case that the rapid growth of Manchester rents may slow. However, the city is still one of the most appealing markets for investors thanks to its combination of reasonably priced properties alongside strong rental demand.
Overall, the rate cuts by lenders could signify cautious optimism and may provide a much-needed respite for borrowers in an otherwise challenging economic environment.