City centre lettings and rental values have risen this year according to research by Jones Lang LaSalle.
The property consultant found the total number of lettings in Manchester increased by 11% year on year, with applications up 7%, and rental values increasing by 9%.
Steve Hogg, lead director on residential in the North West at Jones Lang LaSalle, said that supply was struggling to keep pace with demand in Manchester.
In its latest 'Residential Eye' research report, JLL said it expected Manchester city centre rental values to rise by 3.5% in 2013, while in Liverpool it forecast a rise of 2%.
The current average rental rate on a one-bedroom apartment in Manchester is £600, compared to £650 in Liverpool, and £750 on a two-bedroom apartment in either city.
In Liverpool, the levels of new tenants seeking properties to let increased by around 5% in 2012, which drove rental values by between 3% and 5%.
JLL said that with such a shortage of available properties, the 'churn' of tenants moving from apartment to apartment significantly dropped. This caused a positive increase in length of tenancy term, and an actual, but marginal, reduction in new tenancies being sought by existing occupiers.
Hogg said: "The residential development tap was turned off so quickly in Manchester at the advent of the global financial crisis that the supply of new build space is now lagging behind the market.
"The city's economy has weathered the recent years of stagnation relatively well, while its population has continued to increase, meaning that the market is now awash with opportunities for developers and buy-to-let investors.
"This year we saw Lend Lease bring forward its landmark Cypress Place scheme – which is 60% let in three months since completion – while other developers are now dusting off their plans ready to return to Manchester once again."
Martyn Green, director of residential at JLL Liverpool, said: "This year signalled a real change in the fortunes of Liverpool's lettings market and its future prospects are very healthy with an ever increasing demand for city centre living and the availability of quality space.
"This strength has been highlighted by the interest of major developers in the city, underlined by Delph's first venture into the North through its purchase of West Tower. Other major schemes like Mann Island and East Float continue to attract significant interest."
The full report can be downloaded here .