Why are rents increasing so much in Manchester and Birmingham?
February 9, 2024
By 2028, rents in the UK cities of Birmingham and Manchester are expected to increase by 21.5%, say Savills on their present levels. This is ONTOP of Manchester’s 20% increase in rents registered in a single year between 2022-23 - AND prices didn’t plateau there, increasing by 8.3% in 2023 in Manchester and 8% in Birmingham.
The Office for National Statistics (ONS) announced that the UK had recorded the biggest annual increase in rents since its records began (which, bear in mind, was only eight years ago). In this blog we’re taking a look at what is driving the rental increases in Manchester and Birmingham that are so wildly outperforming other already record-breaking rises in the UK? Should you invest in Manchester and Birmingham in 2024? Absolutely. And here’s eight compelling reasons why.
Eight reasons why the Manchester and Birmingham rental markets are flying
High demand
In both cities a surge in population, increased job opportunities and students returning to study after the pandemic years (remember, they’re both major university cities) has led to unprecedented demand for housing over a very short, pinched period. Imagine the demand like the queues outside the Apple store when they launch a new product. People are literally lining up to view properties in Birmingham and Manchester after the world opened up post-Covid-19 and we all went back to business, work and study. If you’re looking to buy though – don’t worry, they won’t make you queue. Phew.
ECONOMIC GROWTH
Both Manchester and Birmingham are way more economically vibrant than they have ever been since the Industrial Revolution. ‘Levelling Up’ it turns out, has actually been happening (it’s not just a buzzword used by the UK government) and Manchester and Birmingham have managed to steal some of London’s fire to offer a plethora of jobs and opportunities that have in turn grown their economies. Corporate relocations from London to regional cities are the highest they’ve ever been. And both cities thrive across a spectrum of industry, not only in their prowess in finance and commerce but in the creative and digital industries too.
Limited housing supply
To accommodate all these Young Turks moving to Manchester and Birmingham the cities have lots of lovely new build accommodation, right? Wrong! Quality city centre new build stock is at one of its lowest levels thanks to the construction slowdown during the pandemic, the energy crisis and inflation sending build costs soaring. We say this nearly every day, but at this moment in time, more and more renters are competing for less and less housing, hence the situation we’re seeing now. Although supply may increase in the coming decade, because of the way capitalism works, prices aren’t suddenly going to drop and go back to their pre 2020 levels. Ain’t gonna happen. When the squeeze on supply eases it might flatten the curve of rent increases but that’s about it. High rents are here to stay.
Urban regeneration
Brum and Manc have both invested heavily in their city centres, transforming them once again, into places people actually want to live in. Manchester’s Spinningfields is now dubbed ‘the Canary Wharf of the North’, NOMA has seen the redevelopment of Manchester’s most neglected areas, MediaCityUK has dramatically transformed Salford Quays, St John’s, Ardwick…the list is long. Whilst Birmingham has successfully spearheaded the regeneration of former industrial buildings in Digbeth and The Jewellery Quarter to make these areas the coolest places to live in the city. It’s not always the case that if you build it they will come, (Ajman, anyone?), but Manchester and Birmingham have made their planning visions a firm reality. They built and people rented. Build Rent Repeat.
Increased cost of living
This is a simple one. Renting a property is a business. If it costs more to run that property then you pass the costs on to the tenant, ergo rents go up, and my god haven’t we all felt the pinch this last two years with prices rises?
Interest rates and mortgage availability
This is another simple one we don’t need to labour. If it’s more difficult to get a mortgage more people rent. With interest rates coming down this particular stressor may lessen; there’s never been as many UK mortgage products as there are currently on the market and rates are decreasing month on month. That said, there are still a lot of people in the rental market who are putting off buying a home until they feel rates have based.
Shortage of affordable housing
We don’t mean to get political, or sound like a tabloid, but truly, the affordable housing system in the UK is screwed, which is driving more people into the private rented sector, driving demand and thus prices.
Remote work trends
When Covid hit everyone wanted to move out of the cities in search of green space. Now all those who moved are missing their morning pour-over at the cool coffee joint too much and realising what a great pick-up joint the climbing wall actually is, and so they’re all moving back in to the city. These young professionals are the people who drive the rental market and they want to live back in the thick of it again. And luckily for them, Manchester and Birmingham provide them with ample opportunity to live the life of Riley. They can get a well-paid job, live in a cosmopolitan city centre that doesn’t require the bank account of a Russian Oligarch and they can have a very good quality of life. What’s not to like about that? The kids are alright.
You can’t go wrong with Manchester & Birmingham
2024 is the time to invest based on bullish house price forecasts, a runaway rental market and the availability of cheaper mortgages, before prices begin to rise steeply again as more buyers (those who are currently sheltering in the rental market) head back into the market.
We’re tracking a number of developments in both Manchester and Birmingham where clients who bought three years ago have already seen rental yields rise significantly and their capital investment increase by 26%.
BRAND NEW opportunity
ONE VICTORIA GREAT DUCIE STREET MANCHESTER
PRICES FROM £277,000
SLOANE COURT JEWELLERY QUARTER BIRMINGHAM
PRICES FROM £197,500
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RICHARD BRADSTOCK
MANAGING DIRECTOR
about the AUTHOR
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals. The RPA Group was born out of a duty of care to provide property investors with an industry-leading and integral service, one that connects investors with quality and desirable investment opportunities, whilst providing reliable and trustworthy market commentary and analysis alongside, enabling investors to make the best, most-educated decisions for them.