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Manchester or Birmingham for Property Investment in 2023?

The tussle between Manchester and Birmingham for the position of the UK’s second city is a longstanding one. What Manchester offers in Science & Technology achievements, Nobel prize winners (25 and counting!), the Oasis and as the UK’s Most Liveable City; Birmingham counters with the likes of its incredible diversity, JRR Tolkien, Duran Duran and perhaps the highest number of Michelin-starred restaurants outside the capital! Both cities have a young population, are home to the prestigious Russell Group Universities, and are growing dynamically as a result of massive regeneration in the last decade. But how do Birmingham and Manchester measure up in investment terms? 


CONTENTS
1. Population Growth Spurt
2. Where are the Young Professionals Relocating?
3. The New Base for Global Brands & Offices
4. Capital Growth & Rental Yield
5. Conclusion: Manchester or Birmingham? 

Population Growth Spurt in Manchester & Birmingham

Manchester and Birmingham have experienced a population growth spurt over the past 10 years. According to the UK’s latest Census (2021), the population growth rate in both cities surpassed the national rate of 6.4%. While Birmingham grew at a rate of 6.6%, Manchester’s population grew by 10%, with next-door neighbour Salford (also in Greater Manchester), taking home the prize for a 15% growth rate! Both cities have world-class universities and impressive graduate retention rates: a recent study shows that Birmingham retains 46% of the city’s graduates with Manchester at a very close 43%, contributing to population growth in the city.

Manchester’s population grew by 9.8%, with nearby Salford (located within the Greater Manchester region), taking home the prize for a 15% growth rate! Source: Census 2021 ONS. Image credit: City Monitor
Manchester’s population grew by 9.8%, with next-door neighbour Salford (also in Greater Manchester), taking home the prize for the highest growth rate! Source: Census 2021 ONS. Image credit: City Monitor

Young Professionals Relocating to Manchester & Birmingham 

Over the years, more young professionals have been moving to Manchester and Birmingham in search of better jobs and homes. More interestingly is the growing trend of Londoners moving to these cities for greener pastures. 10,200 people left London to move to Greater Manchester, whilst some 7770 Londoners moved to Birmingham in 2018, perhaps the biggest move currently on record—and this is pre-pandemic, before ample living space during a lockdown became a need! 

It’s no secret that Manchester has one the highest labour market growths in Europe and is the best UK city for business friendliness.On the other hand, Birmingham is poised to truly reap the benefits of economic expansion once the High Speed Rail 2 (HS2) commences, being the closest city to London on the railway route. The lifestyle in these cities are also a great draw for hip and happening young professionals and families. 

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The HS2, once completed, slashes the London-Brum commute to only 49 minutes
The HS2, once completed, slashes the London-Brum commute to only 49 minutes and the London-Manchester journey to just a little over an hour. The shortened journey time to the city can transform Birmingham and Manchester’s potential for higher tenant base. Source: Fusion People

Young professionals are looking to spend their earnings not just on mortgage or rent, but also on lifestyle. With the earnings to house price ratio in the UK having gone up incredibly due to inflation, housing affordability has become an important consideration especially with the high cost of living in the capital. The median house price in London’s Zone 5 alone is now almost 12 times the wage amount, hence the appeal of property outside the capital. In Birmingham, the average house price costs £253,992  whilst in Manchester, it costs £284,863—less than half the price of the average London flat. Average asking rents in London are also higher at an eye-watering £2,343 monthly, approximately twice the amount in Birmingham and Manchester.

Global Offices & Brands Set Up Base in Manchester and Birmingham 

Regeneration is critical to upgrading urban spaces and infrastructure, creating jobs, improving liveability and boosting the economy. Both Manchester and Birmingham have undergone urban renewal in a big way over the years. Manchester’s Victoria North is one of the biggest regeneration projects in England whilst Birmingham’s Big City Plan will pave the way for Brum’s facelift over 10 years. 

The HS2, once ready, will transform the London-Birmingham journey time to under 1 hour, while the London-Manchester trip will be reduced to just a little over an hour. Little wonder, then, that these cities have attracted high-profile moves and expansions among businesses looking to skilled workforces and cheaper costs beyond the capital. Goldman Sachs is the latest to join corporate bigwigs like Accenture, Deutsche Bank and HSBC Holdings Plc to set up in Birmingham, whilst over in Manchester, huge brands like Amazon, Microsoft and Booking.com have now joined giants like Siemens, Adidas, Kellogg’s and Arup in making the city their home.

Manchester & Birmingham In Terms of Capital Growth & Rental Yield 

Capital growth in the UK has been favourable in the last 10 years at a 70% increase, with Manchester and Birmingham outperforming the overall average. House values in Manchester grew at an astounding 84% whilst in Birmingham, house values grew by 74% from 2011 to 2022. Because of the relative housing affordability in these two cities, there is still room for growth as demand continues to drive house prices. 

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The same principle applies to rental growth. Asking rents have increased by 16.1% over the year in Greater London, while in Manchester the annual increase was 20.5%. Birmingham follows quite closely with an annual increase in asking rents at 17.6%.

House values in Manchester grew at an astounding 84% whilst in Birmingham, house values grew by 74% from 2011 to 2022. Both cities outperformed the national average. Source: HM Land Registry
House values in Manchester grew at an astounding 84% whilst in Birmingham, house values grew by 74% from 2011 to 2022. Both cities outperformed the national average. Source: HM Land Registry

Conclusion: Manchester or Birmingham for Investment?

Based on the data, Manchester’s prospects for investment appears more appealing. This Northern city commands higher rental yields and average house price growth, indicating greater demand for property compared to Birmingham. Manchester is also highly attractive in terms of lifestyle, having consistently been ranked the UK’s Most Liveable City in The Economist’s Global Liveability Index since 2011. Most recently, Manchester was named the Lonely Planet’s must-visit destinations for 2023—the only UK city to make the guidebook’s yearly Best in Travel list. 

Birmingham is catching up, albeit at a slower pace, but the HS2 will prove to be a game changer for this Midland city. Once up and running, the journey between Birmingham and London will be similar to the typical London journey to work of 45 minutes! This will make Birmingham a highly attractive commuter town for London workers seeking more affordable, spacious housing far from the madding crowd of the capital.

If you are ready to invest, Manchester is the perfect place to look at right now as this city is becoming very popular among property investors. If you want to invest at a lower price in a city with a bit more room for capital growth, and are prepared to wait a little longer for the property prices to increase, Birmingham is the place for you. 

Looking for guidance in where to invest in the UK or have questions? Contact us to speak to an agent today!


By Vivienne Pal

Source:

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