As Britain’s rental market evolves from buy-to-let to build-to-rent, why should investors be turning their attention to the north-west city?
UK property investors are bracing themselves for imminent change – and it’s a change that’s about to create a new and exciting investment opportunity unlike anything that’s gone before it.
When Chancellor George Osborne announced in November’s Autumn Statement that, from April 2016, property investors would be charged higher rates of stamp duty on buy-to-let property purchases, it served as an admission. An admission that buy-to-let is broken; for investors, tenants and home buyers, buy-to-let no longer works.
For over 20 years buy-to-let has been the pre-eminent rental product and investment. The solution for a generation of tenant that rented as a means to an end, and the asset class for investors that generated an ROI of 1,400% inside just 18 years.
But buy-to-let is reaching the end of its lifecycle. Homes initially intended for the owner-occupied sector can no longer satisfy the needs of the modern tenant that actively chooses to rent their accommodation. It also removes a property from the owner-occupied market that could have been bought by a first-time buyer.
A new solution is needed. Build-to-rent is that solution.
Property specially built for the rental market. Property built for the 7.2 million households that will be renting by 2025. Property that doesn’t compromise on amenities and features.
Britain’s rental market is a young one. 60% of 20 to 39-year-olds in the UK will be privately renting in 10 years’ time. For this demographic, Generation Y, renting is the norm. They don’t equate homeownership with success, instead preferring the flexibility that renting provides. They prefer to live in dense urban environments, surrounded by the friendship and social groups in which they are closely connected.
Buy-to-let wasn’t created for this market – but build-to-rent is. Fully managed city-centre properties. 21st century design. Homes within vibrant communities. And for investors, build-to-rent creates an opportunity to invest in an asset that will address this gap in the market.
So what’s Manchester’s role in all this?
It’s a city in desperate need of a rental revolution. And a young city at that. 60% more 25 to 29-year-olds live in Manchester than anywhere else in the country, 89% of the growth in population expected in the city by 2025 will be made up of Generation Y, while a 58% graduate retention rate creates 20,000 new permanent workers each year, every year.
Yet Manchester has one of the lowest levels of housing supply in the UK. City targets outline a need for 4,000 new units each year to cope with the growing population of Generation Y tenants, but just 1,471 are currently in the pipeline; it’s a city that needs a place to live.
Select Property Group has published Investing in Manchester: Why is Manchester at the heart of the UK’s build-to-rent revolution?, a whitepaper that analyses the evolution of buy-to-let into build-to-rent and why Manchester is the city needs this new product more than any other. Click here to download.