Keeping you up to date with the latest property news

  • Manchester Landlord Licensing Under Consultation

    Manchester City Council has begun a consultation on introducing compulsory landlord licensing in Manchester’s worst housing blackpots. Landlords renting out... MORE
  • Splittable - The Must Have for Renting With Friends

    Anyone who has shared a flat knows how complicated bills can get. One roommate ends up buying all of the loo roll,... MORE

How Affordable is it to Rent in Manchester City Centre?

Manchester city centre is a great place to live and work. It is a city that is continually growing but doesn’t seem too large. Out in Spinningfields but want to see friends in the Northern Quarter? 5 minute taxi ride or a quick stroll so you can pop into Northern Soul on the way. Moving to Manchester and want to live no more than a 20 minute walk from work on the average city rent? Take your pick, you’ll probably only be ruling out Spinningfields and the Beetham Tower. 5 minute walk? I still think we could make something work.

Manchester City Centre living is still a relatively novel concept. In 1987, the population was an inconceivably small 300. Estimates now put the figure at 50,000 , treble the amount 10 years ago. This can be seen by the housing type typically being largely 21st century new-builds or conversions, with plentiful mill conversions almost being a signature piece of city centre living.

Living in the city centre is great, but then again when isn’t that the case? Normally it’s not so great when it becomes extremely unaffordable to do so. Speak to any graduate moving to London for their first job and the majority will have some story of paying the majority of their salary for a bedroom that only a young Harry Potter would be envious of.

So is Manchester different? Can you afford to live in the city centre without having to worry about paying the rent while meeting all your other monthly commitments (and temptations).

The first clue to whether this is possible is the median age of Manchester, 29. Many graduates decide to move to the city centre for their first job, even many students are able to enjoy the benefits, particularly along the Oxford Road corridor. Of all the residents moving into Manchester city centre in the decade to 2011, nearly 60% had a degree, the majority of which were aged under 35.

MUDB-net-change-in-population-graph-768x500

Source: Centre for Cities

With the economic climate looking a bit gloomy it is worth looking at the figures to see whether this trend is sustainable.

What is the average salary?
The average salary in the city centre according to the most recent provisional figures from the Office for National Statistics states the average salary in Manchester is £28,558.

What would count as an affordable rent?
Unfortunately there is no clear measure on what is affordable, it really varies between regions as the price of living, services and goods differ in each one. The most common affordability check a tenant will undertake is during referencing. This will involve a basic affordability check from the credit agency based on the proposed rent and their salary. To pass, a tenant must have an annual gross salary of 30x the monthly rent which equates to being able to spend 40% of their gross salary on rent.

NatCen, an independent social research agency advise that this figure should be 30% and used it to back the London Living Rent Campaign.

The other measure of affordability is assuming the same affordability checks that would be applied to anyone applying for a mortgage can be applied to a renter. Hometrack’s model is a lot more strict saying 35% of net income can be spent on rent, assuming net income is 74% of gross salary.

By these models, it means an induvial earning an average salary in the city centre can afford to spend the following on rent:

• Credit agencies: £951.93pcm
• Natcen: £713.95pcm
• Hometrack: £616.38pcm

The typical rental in Manchester is 2 bedroom apartment, where most households live as a couple or as 2 sharers. This helps make affordability even more attainable when renting as the average household can afford double these figures for an apartment.

Figures for rental prices again vary, with the Valuation Office Agency being the main provider of achieved rents opposed to asking prices, but not having any data on the City Centre specifically. We have used our own Rightmove analysis of average asking prices in August 2016 along with Hometrack’s analysis to produce alternative figures with Hometrack estimating there is only a 1-3% difference between asking prices and achieved rent. This shows the average 2 bedroom property in M1 to be:

• VOA: £850pcm
• RM: £1047pcm
• Hometrack: £1033pcm

This means the average household is spending the following of their gross income according to each valuation metric:

• VOA: 17.9%
• RM: 22%
• Hometrack: 21.7%

Even with the average graduate salary in Manchester of ~£25,000, the figures make it look like Manchester is certainly a very affordable place to live. If we isolate Hometrack’s metric of affordability and their average of renting a 2 bedroom property then the minimum salary would be £23,931.

Rental prices are growing year on year, whereas wage growth in Manchester is only 1.7%. How much will they need to grow before they pass affordability for the average salary?

Table

Depending on which model we look at, either rents can raise a lot or a more likely moderate amount. Savills estimate Manchester will see 17.0% growth over the next 5 years, so it remains to be seen if affordability will kept in line with wage growth. As supply in the city is not meeting demand, combined with a Manchester population shift of 14% from homeowners into the private rented sector (the largest shift in the UK) between 2003-2016, there will quite likely be a shift in affordability within the next decade.

The above table does serve as a warning about the affordability calculation used by credit agencies. 40% of gross salary does allow for references to be cleared when it is not necessarily truly affordable.

Arrange a Viewing