UK Inflation Hit a 40-Year High, With Housing the Biggest Driver
UK inflation hit a 40-year high, with housing the single biggest driver. The latest UK private rents report at the time showed rents rising 5.0% year-on-year, closing in on the 8.7% headline inflation figure (May CPI).
Rents had been on an upward trend since July 2021. Across UK regions, the North West led with a 14.2% increase, followed by the South West at 13.7%, then Yorkshire and the Humber at 12.4%; London, the region most people are familiar with, stood at 8%. Within the North West, Manchester — its main city — stood out in particular, with growth of 10% on an already high base, breaking a nearly 10-year record for rent increases at the time.
A Tight Housing Market in Manchester: New Building Slowing as Population Grows Strongly
Why had Manchester’s rent increase been so pronounced? Overall inflation was clearly a factor, but the tight balance between supply and demand was the real driver behind rising rents in Manchester. According to the latest census figures at the time, Manchester’s population had grown by 9.7%, from 503,100 in 2011 to 552,000 in 2021 — a net increase of 48,900. Over the same period, only 16,700 new homes had been added, giving a ratio of 2.9 people per new home added — 0.5 higher than the UK’s then-average household size of 2.4 people per household in England. Based on the past decade’s figures, an additional 4,300 homes would have been needed just to reach the national average. Yet new housing starts had actually slowed: from a peak of 3,300 in 2018, new-build numbers fell to just 910 and 920 in 2021 and 2022 respectively — a 71% drop — meaning that, at that pace, it would take at least 4.3 years to reach balance.
It’s worth noting that this analysis only counted the fixed resident population recorded in the 2021 census, and did not include immigration. The Office for National Statistics (ONS) reported, separately, net migration of around 606,000 for the year ending December 2022, including 52,000 Hong Kong nationals arriving on BN(O) visas. According to a report from the Hong Kong Association in Britain, 12.6% of these arrivals chose Manchester as their first city of residence — a figure not captured in the census’s resident population count. Since then, net migration has fallen sharply, to roughly 171,000 for the year ending December 2025, and this Manchester-demand narrative built on the 2022 peak should be reassessed against that decline. Given that a full UK new-build cycle (from peak to slowdown to renewed growth) typically takes one to two years, even the 4.3-year estimate to reach supply-demand balance may have been optimistic at the time.
Which Property Types Saw the Biggest Manchester Rent Increases
The factors above meant rents were unlikely to fall in the short term. But for anyone investing, the real question is: what does the market actually want? Looking at how rent increases varied by number of bedrooms, three- and four-bedroom-plus properties saw the largest increases, at 10% and 14.4% respectively; one- and two-bedroom properties also performed solidly, at 8.9% and 8.5%; studios lagged behind, at 4.5%. It’s also worth watching the lower-to-upper-quartile spread — the gap between the top 25% and bottom 25% of rents overall. A wider spread generally means residents in that segment are willing to pay more for better facilities and living environment. Two- and three-bedroom properties stood out most on this measure, with spreads of 4.1% and 5% respectively — well above other bedroom counts.
Zagdim’s own analysis of actual tenancy data for recently completed premium apartments in central Manchester found the same lower-to-upper-quartile pattern. That analysis found premium apartments delivered an average yield of 6.23% overall, and rented for 20% to 80% above the area average. Buildings in this category tended to share the following features:
- ✔ Convenient living and transport (a 10-minute neighborhood)
- ✔ 24-hour concierge service
- ✔ Gym
- ✔ Residents’ lounge
- ✔ Co-working space
In summary, rent growth is the most direct reflection of market demand. Since the pandemic, tenants’ priorities around room count, living space and building amenities have clearly shifted from quantity toward quality. Anyone considering investing in Manchester may find it useful to keep these characteristics in mind.
Sources and Further Reading
ONS – Long-term international migration, provisional: year ending December 2022
ONS – Consumer price inflation, UK: May 2023
ONS – Index of Private Housing Rental Prices, UK: May 2023
ONS – How Life Has Changed in Manchester: Census 2021
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