It was flavour of the month five years ago - but investors in Manchester today should proceed with caution, writes Edel Morgan
On the face of it, Manchester is the kind of property boomtown that any hungry investor would want a piece of. Vast swathes of luxury apartments are going up all over town to cater for an expanding young professional market. Better still, these professionals possess considerable spending power and will pay premium rents of £900-plus (€1,348) for a suitably plush two-bed apartment.
An upsurge of companies are relocating from the south of England to Manchester to avail of attractive commercial property deals and it is estimated that 20,000 people will work in the city centre by the end of 2005.
So how can an investor lose? Surprisingly easily, if they do not proceed with caution. Once a property hot spot for Irish investors, the glut of new and improved apartments coming on stream in Manchester is appealing more to the fickle rental pool than second-hand apartments, which has prompted a more cautious approach.
Those who go in without a good knowledge of the local market may find themselves lumbered with a property that is considered dated by the discerning tenant market and which they cannot sell.
There is an oversupply in some sectors of mid-market flats while the luxury £400,000-plus (€599,000) luxury market has so far remained relatively immune to the downturn.
Manchester has seen great prosperity since the city centre was remodelled after the Provisional IRA bomb blast at the corner of Corporation Street and St Mary's Gate in 1996.
Out of the devastation of the explosion, the once depressed city centre has been completely transformed with the help of £583 million (€880 million) of private and lottery funding. In the reconstructed Millennium Quarter, tall glass and steel buildings - like the wedge-shaped Urbis exhibition centre - stand beside restored period buildings. It is crammed with bars, restaurants and leisure amenities, like the £150 million (€227 million) Printworks complex.
Coveted retail names like Harvey Nichols and Selfridges have moved in and the once reviled Arndale centre is undergoing refurbishment.
One of the most high profile apartment developments near the trendy northern quarter aimed at young professionals, Number 1 Deansgate, by Crosby Homes, also stands on the former bomb site.
Beetham Tower is currently under construction and will be the highest residential building in the UK outside London, and will also comprise a 285-bed Hilton hotel and a sky bar on level 23. Deansgate Locks is another scheme aimed at the lucrative young professional market.
The former rave club Hacienda shut its doors to clubbers in 1992 only to reopen as luxury apartments selling for £180,000 to £400,000 (€269,916 to €599,857).
Developer Urban Splash has been acclaimed for its work converting mills and warehouses into apartments, like the trendy Box Works and Timber Wharf in the Castlefield district.
It would be easy to be swept away by the tide of buoyant optimism but a browse through the supplement of a local newspaper shows that rents vary wildly from development to development in the city centre, as do selling prices.
Peter Bastable of Simply Mortgages describes the Manchester residential property market as "the flavour of the month five years ago but now well overcooked. Around 1999-ish they started building apartments left, right and centre and the pace of building outstripped the speed with which people were coming to live in the city centre. They are still building and there are significant units in the pipeline."
He says it is now "nearly impossible" to shift second-hand apartments as the standard of new apartments rises to make the second-hand ones look tired."
James Carroll of Investor First says it is very much a case of buyer beware. "In city centre Manchester I would be very careful where I buy and would find out whether there is more demand than supply in an area."
Which area an investor targets may depend on whether they are looking for medium or long-term returns. "You can get good value in the Piccadilly Basin in east Manchester which may pay off down the line when the area becomes more developed but, if you are looking to get in and out in three or four years, it wouldn't be the place.
"Before buying into a development always look at comparable developments; how much they are renting for and check out what the competition is producing. It may be wise to go for a high-spec development by quality builders in a good location and make sure you are not paying 10 per cent more than you should be paying for a unit."
Among the "good" locations is £700 million (€1.053 billion) new Spinningfields on the edge of the city centre which is being touted by Irish agents as the equivalent of the IFSC and where Investor First has reserved a development over 62 apartments for Irish investors. He also rates Whalley Range, which he says is the equivalent of Dublin's Rathmines and Ranelagh. "It was once the place where rich cotton merchants lived but then went through a slump. It is now on the up again and small developments of 20-30 apartments are being built within a five-minute drive of the city centre."
Hulme, where two years ago "you would have been mad to buy", is now taking the overflow from nearby leafy Didsbury.
Didsbury, now a highly desirable address which he likens to Dalkey, was a less than popular location 10 years ago.
"It's all about watching for the next place to emerge. While I wouldn't go for Piccadilly Basin at the moment, it might be a better idea to go further east to somewhere like Ashton-under- Lyne."
NV Buildings reputedly sold a waterside development of 246 apartments opposite the Lowry Centre for prices ranging form £172,950 to £704,950 (€260,162 to €1.06 million) within a day.
Despite this, Carroll is not as enthusiastic about Salford where the quays area is undergoing regeneration .
"They may be lovely apartments but it's still Salford. It doesn't really make sense to pay £300 per sq ft and above in Salford as against £284 per sq ft in somewhere like Spinningfields which is in the city centre. They may be good quality apartments but that has to be underpinned by local rental demand."
Paul Coghlan of the Prestige Group says that investors should also look at the bigger picture.
"Greater Manchester has a population of 2.7 million and a workforce of 1.2 million and a strong service sector. It is estimated that 20,000 people will live in the city centre by the end of 2005. It is now under 10,000."
Mid-market apartments have been the biggest casualties of the current market with yields down from 9 per cent to 6.5 per cent.
"In the city centre I'd recommend investors go for new apartments at the upper end of the market near water, otherwise there are opportunities in satellite areas."
Greater Manchester covers 1,286 sq kms of land, and is a conurbation made up of the old cities of Manchester and Salford and the metropolitan boroughs of Bolton, Bury, Oldham, Rochdale, Stockport, Tameside, Trafford and Wigan.
He says Prestwich, where his company procured apartments in the Radius development for the Irish market, is a "strong, old, wealthy community", and also lists Altringham and Didsbury as good locations. He has "mixed views" about Trafford which Nationwide Building Society has tipped as the next property hot spot.
Coghlan points out there have been a lot of winners in the Manchester property boom.
"The Leftbank apartments in Spinningfields have appreciated by 25 per cent since the first phase."
About Manchester
POPULATION: 545,000 - 60 per cent of the population of Britain live within a two hour drive of Manchester.
MAIN INDUSTRIES: Cotton, metallurgy and chemical industries. Retail, finance and business services, leisure, tourism, the creative industries, education.
UNIVERSITIES: Three universities: University of Manchester, UMIST and Manchester Metropolitan University. Together with nearby Salford University these give the area the biggest student populations in Europe. The first two institutions are to merge in autumn 2004 to form the largest university in Britain.
TRANSPORT: Manchester lies at the heart of a national transport infrastructure: its airport handles hundreds of domestic and international flights daily; there is an hourly train service to London; and as a result of the opening of the Metrolink tram network, around 2.5 million car journeys have been taken off the road each year. The free 'Metroshuttle' bus service for city centre visitors connects the major train and tram stations with Manchester's busiest shopping and leisure areas.
FROM DUBLIN: Daily flights
AGENTS: The Prestige Group (01 6686036); Investor First
(01 2076474)
