There is seemingly no end to the amount of people wanting to live in Manchester city centre. Official Manchester council figures show that in 1991 the city had only 900 residents. That grew to 11,700 in 2001, and is expected to reach 20,000 by 2007.
Residential developers are in a building frenzy trying to keep up with demand. Figures from FPDSavills show an estimated 30 developments in progress in and around the city centre, with 3,500 flats at various stages of construction.
The effect of the government’s new moratorium on housebuilders in the Manchester market remains to be seen (see below). But for now, housebuilders are continuing to develop, and investors are lining up to buy into the goldmine of the buy-to-let market.
So keen are investors to buy off-plan up to 12 months before completion that developers and their agents are aiming their buildings directly at them.
Knight Frank’s residential expert Julian D’Arcy is agent for ING Real Estate’s Royal Mills redevelopment at Ancoats, just outside Manchester. D’Arcy states that Royal Mills’ 312 apartments is “for investors, a new market waiting to happen”.
In a press release issued in January, Elisabeth Williams, head of new homes for FPDSavills states: “The choice of property on offer to investors, from the wide range of new build properties to traditional conversions, is an attraction to the city.”
Williams plugs Westbury Homes’ “magnificent” Leftbank apartments. She says: “Investors searching for a top of the range product should look no further. Prices range from £160,000 for a one-bedroom apartment to over £1m for a penthouse.”
But the question is, how long will this boom in the buy-to-let market last?
Indefinitely, says Christopher Dean, Williams’ colleague at FPDSavills. “People have been telling me the market will crash for the past two to three years. But low interest rates have helped to maintain the market.”
Interest rates aside, Dean says there are other elements helping to keep the market buoyant, such as companies and pension funds seeking homes for investment cash.
Other agents see the market grinding to a halt a lot quicker, and they put Dean’s optimism down to the fact that he is an agent for several residential schemes. Others agree with Dean’s analysis, but think that economic realities will eventually slow the market.
Ian Thomlinson, associate director ofresidential for Jones Lang LaSalle, says: “There is still scope for investors, but we are not seeing any appreciation in rental values. I know of cases where penthouse rents have dropped from £1,400 to £700.
“Yields at the moment are between 4.5% and 6%, so you are getting close to what people are borrowing at those rates. People are in it solely for capital appreciation, but we predict interest rates will be at 5% by the end of the year,” says Thomlinson.
D’Arcy contributes another thought on the buy-to-let market. “I’ll be interested to see what impact REITs will have on the market. There’s a lot of investors that don’t want the problems or complications of investing directly into property, but REITs would prove an easy vehicle.” D’Arcy believes the effect of REITs – restyled property investment funds in last week’s Budget – could be “enormous”.
But Thomlinson argues that owner-occupiers will start coming back to the housing market as developers exhaust the demand from wealthy individuals and “start looking at the cheap and cheerful”.
There are a lot of theories about what could happen in the housing market. But most agents believe the biggest factors will be what the Bank of England’s monetary policy committee does with interest rates, and to what degree a huge terrorist attack could affect the economic situation.
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Little known developer r.gen is making a green contribution to Manchester’s forest of residential developers. The company was formed in 2001 by Phil Summers, Judy Noah and Fiona McAuley – who had all previously worked for Irwell Valley Housing Association. McAuley had already worked in partnership with Urban Splash on a development in Chorlton, where she first became interested in green developments. Seeing a niche in the market for environmentally friendly housing, the three partners borrowed £2m to embark on their first development — 26 two-bedroom apartments at Little Alex on the border between Hulme and Whalley Range, just outside Manchester’s city centre. The predominantly wooden, minimalist-style apartments will include facilities to recycle rain water, solar panels, heat recovery units and formaldehyde-free units. No PVC windows will be used because “the amount of energy that goes into making them is not good for the environment”, says McAuley. Summers admits that the cost of building a “green” house can be up to 30% higher than conventional homes. But he says the design results in long-term cost savings, particularly for fuel. The group has already sold eight houses. But some commentators believe r.gen will face a big challenge convincing Mancunians that green is good. FPDSavills’ Christopher Dean says Taylor Woodrow’s green experiment at Macintosh Village in Manchester city-centre’s Southern Gateway has not been very successful. The Green Building, designed by Terry Farrell, is one of three blocks of flats in the £130m village that was started two years ago. It comes with solar panels and a windmill to provide power. Dean says: “It’s not completed yet, but it has not sold very well.” However Julian D’Arcy, residential expert with Knight Frank and agent for the Green Building, says the only reason it has not sold is because it has not yet been marketed. “We haven’t tried to sell the building. We have held back because it’s so unusual. It’s so hard to get your mind around the benefits of a green building that it’s better to wait until it’s completed so people see it as it is.” The Green Building will be finished in the autumn. Dean questions whether any green design would truly work. “I would like to say that people are interested in buying green, but they aren’t. It’s a lot more expensive to build. Developers have a go at it because they have an interest in creating something that’s different. There’s possibly a small percentage that would pay more because they are green-minded.” But that has not put off r.gen. Summers says the company is already looking to spread its green message by buying a further five sites. |
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When the government slaps restrictions on a booming property market, people understandably get irritated. In the North West, housebuilders are feeling particularly picked on by government legislation, in place for the past nine months, which is forcing them away from lucrative sites and into regeneration areas. Members of a government committee that visited the North West last year were aghast at the number of abandoned streets in areas such as east Manchester, Salford, and Oldham. In contrast, Stockport, Trafford, north Cheshire were in high demand. As a result, the government insisted that developers forsake lucrative development areas for more rundown sectors. The move was made under RPG 13, which sets out residential development policy. The policy has rattled planners, agents and developers alike. Richard Woodford, HOW planning director, believes the government has been too harsh on housebuilders in the North West. “It’s a shock tactic and it’s not just. It’s right to concentrate on the areas that need it, but the implications and costs to smaller housebuilders –in terms of finances and jobs – could be significant.” Ian Thomlinson, associate director of residential for Jones Lang LaSalle, agrees that the government’s policy is heavy-handed. He points out that there is still underdevelopment in Cheshire and Lancashire. Nick Whittingham, a director with David Wilson Homes, says: “We have a moratorium and it’s pushing us into particular areas. It’s something that we, as housebuilders, have to get used to.” |
