M9 rents are increasing 4 times faster than house prices
It feels almost like a single day can’t go by without some new study or prediction about the UK housing market and the price of property. We all get waylaid by the figures from London telling us that you can now pick up a “bargain” shoe box for more money than you get in the entire bank of a game of monopoly per month. We see the broad enveloping figures that tell us that growth is at this percentage or that percentage which is higher or lower than predicted when they threw spaghetti at the wall however many months ago.
I respect the figures produced by the learned people in the suits in London, but for my own investments and my own decisions I trust what I know, what I see and what I experience day in day out in the M9 area.
Earlier this month I attended the Landlord and Letting Show at Event City, it was a really good opportunity to get myself out of the office and to learn more about the opportunities and experiences others like myself were having around Greater Manchester. I got into a debate with 3 other investors who were adamant that yields were going down year on year.
For those who don’t talk the lingo, a yield is the % annual return on investment your property is achieving. As a really basic example, say your property cost you £100,000 and you earn £10,000 a year from it - this is a 10% yield. Your savings account might be giving you a 1.5% yield, your ISA might be giving you a 2.5% yield.
Average property yield in M9 today, on a 2 bed house is 6.9% - 10.2% - depending on the property. Over the past 10 years, rent rates have increased from an average of £360/m to £550/m for the exact same properties. This represents a growth of 52% in the cost of rent in our area.
This standardisation of prices has been driven by numerous factors not just on a local or city wide level, but regionally and nationally, and due to this the trend of rent increases is not going anywhere. Rents will continue to grow and right now Manchester as a whole is the fastest growing city in the United Kingdom and within Manchester M9 is the most attractive area, in terms of return on investment, to buy rental property.
10 years ago, the average 2 bed property was worth £73,969 and it fetched £360/m in rent, this represented a 5.8% yield. Today that same property is valued at £87,875 (a 18% increase) and demands a rental value of £550/m (a 52% increase) representing a 7.5% yield (a 29% increase in yield).
The recent changes in stamp duty have hit property investors hard, especially those chasing the high value, high rent, low yield properties in the south of the city. As an example, M21 properties have seen a whopping 25% increase in value, but their rental yields are a measly 4.7%. Would you be willing to pay £7500 in stamp duty to tie up £250k in an investment that is going to give you a 4.7% return or would you rather pay £7900 across 3 properties, diversify your portfolio to reduce risk, tie up only £240,000 and benefit from a 7.5% yield?
I can see why, in other areas of the city, investors are complaining about yield drops, their markets are inflated beyond belief and they are playing a high risk game for low rewards. They’re missing out on the opportunities in M9 because they’re closed off in their “affluent area” bubbles. People are people no matter where they live in the city, property investment is no easier, harder or any different in any postcode area- so why chase profits in a market that may be close to breaking point, when everyone always needs a place to live?
In my eyes its a no brainer, M9 property is the smarter investment any day of the week.
You will have read in all of my posts so far that property is a long term investment. I’m always less concerned about the increase in value of the property (although I always want positive growth) and more concerned about how my investments are working for me and what return they’re giving. If you are considering investing in property in the M9 area I encourage you to seek independent advice and to do your homework to ensure investing in property is right for you.