Manchester Property Insights: Ignoring the Doom-monger Headlines

21st Sep 2023
Matthew Smith

Navigating the property landscape, particularly in a city like Manchester, requires more than just a reactive approach to the daily newspaper and social media headlines.

As homeowners and potential investors are continuously bombarded with whispers of falling house prices, coupled with rising interest rates and the heartache of negative equity, there's a tangible atmosphere of anxiety and trepidation. Yet, the truth we must all embrace is this:

No one can predict the property market with pinpoint accuracy, not even the experts

Every press release from Halifax, Nationwide or the Land Registry with the merest hint of a downturn or hiccup in the property market becomes headline fodder, often stoking fears and uncertainty. Why do the newspapers and clickbait doom mongers post that?

Because ‘bad news’ sells newspapers!

With interest rates on an upward trajectory, both prospective and current Manchester homeowners are grappling with pressing questions…

Will the house price decline continue? Is negative equity on the horizon? What of interest rates? Let us dive in on the current state of play.

Historically, property prices have exhibited a rhythmic dance of peaks and troughs. A review of housing market trends over decades would reveal this inherent cyclical nature. House price declines are only a prelude to eventual rebounds. This pattern has been the underpinning of the property market for generations.

What of negative equity?

If Manchester house prices drop by 10%, a small percentage of homeowners (2.83% of all homeowners that have bought in the last two years) will be in negative equity.

Yet, that is only a problem if they decide to sell the property, and as we all know, homeownership is a long-term thing, and most of those who would have negative equity will probably be on five-year fixed low-rate mortgages.

But what if house prices dropped from the peak in 2022 by the same percentage as they did in the global financial crash in 2008/9?

If that were the case, house prices would just return to the Land Registry house price levels achieved during the pandemic – and nobody was complaining about those! (Although the number of people in negative equity would increase slightly).

As Manchester homeowners face uncertainty regarding potential house price drops, it is crucial to recognise the various factors that support the housing market’s resilience. While economic conditions can fluctuate, history has shown that housing values tend to appreciate over the long term.

Manchester homeowners can also take comfort in the differences between the 2023 market and the 2008 housing bubble, including stronger equity positions and a more regulated lending environment.

So, what does the future hold for Manchester homeowners?

For homeowners in Manchester, it's crucial to understand the broader context. Global economic dynamics, national policies, regional developments, and local demand-supply dynamics all play pivotal roles in determining property prices.

As such, while short-term market shifts are inevitable, they don't necessarily define the long-term trajectory of property values.

Property should often be viewed as a long-term investment

While the temptation to make quick decisions based on current trends is strong, it's vital to consider the bigger picture. Remember that property isn't just an asset; for many, it's a home, a place of memories, and a cornerstone of family life.

The mortgage interest rates of 1% to 1.5%, that we saw up to 18 months ago, are not going to return. Yet, looking at 5-year swap rates, the money markets are predicting (with billions and billions of pounds of their own money at stake) that UK interest rates will come down significantly over the next 5 years from their current levels of around early 6%.

There is a saying in property - “Marry the house, and date the interest rate”

It simply means you are committing to a long-term relationship with the house you love, but you can dump the interest rate when you re-mortgage. The idea is that when you find the house you love, you buy it, with the anticipation that you will be able to refinance later when interest rates drop.

Diving into the archives of property history, one witnesses a tale as old as time: a fluctuating market characterised by peaks and troughs. Like the ever-rolling waves of the sea, property prices rise, fall, and rise again.

Such is the cyclical nature of housing markets worldwide, and Manchester is no exception.

For the residents and homeowners of Manchester, understanding the broader tapestry of property dynamics is paramount. Consider these vital elements:

Global and Local Economic Factors

Manchester’s property market, though unique, doesn't exist in a vacuum. International economic shifts, national fiscal policies, regional developments, and even local events play decisive roles in shaping property prices. A short-term dip, as mentioned above, does not foretell a long-term decline or house prices crashes as seen in 2008.

The Long Game

Traditionally, owning property is a marathon, not a sprint. Quick, impulsive decisions, driven by panic or greed, rarely bear fruit. Instead, a more measured, patient approach, considering the property's long-term potential, is often more rewarding.

Manchester’s Rich Tapestry

With its historical charm, coupled with an array of property types ranging from vintage homes to contemporary modern brand-new homes, Manchester offers resilience against sweeping market downturns. This diversity provides both stability and opportunity.

Infrastructure & Growth

Manchester's ongoing development and infrastructural projects often lead to a long-term appreciation of property values, countering short-term market fluctuations.

Rental Prospects

A potential silver lining during market downturns is the rental market. Manchester's strategic location, history, and vibrant community make it a perennial attraction for renters. For Manchester homeowners, this can translate to a steady income stream even if the sales market looks less favourable.

Historic Resilience

A glance at Manchester's past reveals a property market that has not only weathered numerous economic challenges but often emerged stronger and more robust. This resilience speaks volumes about its inherent potential.

In weaving through the property labyrinth, homeowners and investors in Manchester must cultivate a panoramic view. While it's easy to get swayed by the market's immediate waves, one must remember the vast seas and ocean beyond. The short-lived troughs are merely precursors to the next crest.

To truly succeed in the Manchester property market, it's less about reacting to today's noise and more about tuning into the timeless melodies of history, patience, and informed foresight.

If would like a chat about where you sit in the Manchester property market, do not hesitate to give me a call or drop me a message on social media.

by Matt Smith.

I have had the privilege of working in the property industry for the past 20 years. Throughout my career, I have gained extensive experience in sales, lettings, and property investment.

With a specialist knowledge, I have established myself as a trusted authority. Since 2007, I have been an integral part of Thornley Groves Estate Agents, a company I now proudly serve as the Managing Director, ensuring our clients receive exceptional service and achieve outstanding results.

With a dedication to excellence and a deep understanding of the industry, I strive to cultivate the careers of our staff to enable them to emulate the same high standards.