Last season’s runners-up, Manchester City, started their campaign with a win but suffered a hugely disappointing 5-2 defeat to Leicester this weekend to slip into the bottom-half.
Neville backed Pep Guardiola’s City to win the Premier League before the season started but says he has already been forced to change his mind, with Liverpool now his clear favourites to lift the title.
Jurgen Klopp’s side have beaten Leeds United, Chelsea and Arsenal to make a perfect start to their title defence and Neville says Liverpool were ‘outstanding’ during their 3-1 win over the Gunners on Monday night.
Speaking on the Gary Neville Podcast, the Manchester United and England legend said: ‘I picked Manchester City before the start of the season, when we were asked to make our predictions, just on the basis that they would respond.
‘I thought they would do more in the transfer market, but I’m in the position whereby, and it’s only three games in, I’m going to change my mind.
‘It’s not because of Sunday. I was obviously at the Etihad on Sunday to see Leicester beat City 5-2, but just watching Liverpool, even in that first game against Leeds where some people took out of it that they weren’t at their best, they were sloppy, and you could get at them.
‘That was a mad game, the type of which I have been involved in myself and if you come out of those games on top, when you are not at your best, it demonstrates something.
‘They also signed two players after that game and then they went to Stamford Bridge to face Chelsea and they did the business.
Liverpool came from behind to beat Mikel Arteta’s Arsenal 3-1 at Anfield on Monday and Neville paid tribute to the Reds’ display.
He added: ‘Against Arsenal, the first-half performance was outstanding. When you are up in the gantry, you see more in terms of the shape against on corners.
‘They were really serious about their work. Their reaction to giving the ball away was impeccable all over the pitch.
‘The front three set the tone for it, but everybody else backs them up. They were absolutely outstanding.
‘You can take Jordan Henderson and James Milner out, who used to be the workhorses of this team, and they are all workhorses now.
‘Naby Keita is somebody who has taken a couple of years to get up to speed, but now you see him play and it looks like he’s getting there. Fabinho moves through the game and doesn’t break sweat.
‘Georginio Wijnaldum is a player that you never really give him the credit, but he does everything really well.
‘It’s a really top team and we know that from what they’ve achieved over the last couple of years, but it looks like they’ve come back to do it again.’
Neville also warned Manchester City that they face dropping out of the title race if they continue to drop points.
‘Pep Guardiola is the best coach in the world, his team have been outstanding, and they will get better, no doubt, but he’s got to be careful,’ Neville said.
‘They dropped eight points to Liverpool in the first eight games of last season and found they couldn’t catch up.
‘They can’t afford to do that against this Liverpool team, it’s too good.’