House prices in the North West will increase by 18.1% in the next five years, with growth in the region outpacing the rest of the UK in 2017, according to JLL.
The residential market in key Northern Powerhouse cities will be buoyed by high demand and low supply, resulting in growth in both rents and capital values, despite UK-wide uncertainty, JLL research has found.
In Manchester, JLL predicts that capital values in the city will grow by 28.2% in the next five years.
The average two-bedroom flat in the city, which now fetches £230,000, will cost £246,000 by the end of 2017 alone – a 7% increase. Rents in the city are forecast to increase by 20.5% by 2021.
The data follows a strong year for Manchester’s residential sector in 2016, during which capital values grew by 15%. Rental demand in the city was also highlighted last year when Manchester’s first PRS development, LaSalle Investment Management’s Greengate scheme, was 70% let in just eight weeks.
JLL expects build-to-rent developments to be the mainstay of new schemes in Manchester and the city to be among the first choices for international investors targeting the UK’s build-to-rent sector. Build-to-rent schemes currently under construction include the 478-unit first phase of Capital & Centric and Henry Boot Development’s £250m Kampus project in Manchester.
In Liverpool, where two-thirds of homes in the city centre are privately rented and half the population is young professionals, rents are set to continue to grow by 17.6% over the next five years. Capital values in the city centre, due to grow by 22.8% in the same period, will outperform many other major regional city centres and Greater London (19.2%).
Leeds is expected to see the largest increase in rents, 22.2%, of any city in the UK over the next five years.
According to JLL, Manchester, Liverpool and Leeds will need an extra 3,300, 2,000 and 2,200 new homes every year respectively. This prediction is supported by forecast GDP increases in the Northern Powerhouse’s major cities, driven by growth in the professional services, transport and construction sectors.
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.”
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