There are many advantages to investing in property. The real estate market generally outperforms many other investment opportunities such as stocks and bonds because:
- Property is a stable asset
- Different property types allow you to diversify your investment portfolio
- There may be greater tax benefits open to you
- Fixed fees on mortgages protect you from inflation
The UK property market in particular has proven to be one of the strongest and most reliable in the world. Despite setbacks due to Brexit and a global pandemic, the housing market has remained resilient, and experts are predicting the value of properties to grow exponentially in the next few years.
We have listed the main advantages of property investment in the UK, so you can gain a greater understanding of the market.
An Undersupply is Driving Demand
The UK housing market is vastly undersupplied and requires 300,000 new homes to be built each year in order to keep up with the demand. However, the UK regularly struggles to reach these targets. In 2019, only 170,000 new homes were constructed, which meant there was a shortfall of 130,000 properties.
With such a drastic difference between supply and demand, this is creating excellent opportunities for investors. UK residents often find themselves competing against one another in order to find a modern property that fulfils their needs. Some of the more common reasons for the growing popularity of properties include:
- Close proximity to local amenities (such as shops, schools and transport links)
- The area is undergoing major redevelopment
- Low crime rates
- A lower council tax valuation band
- New developments often include greater benefits for residents such as: on-site gyms, swimming pools, laundrettes, roof terraces and co-working spaces
With limited accommodation on the market meeting these needs, investors have plenty of potential tenants looking to rent out their properties, which leads us on to our next point:
Rental Figures are on the Rise
Thanks to the current undersupply of suitable accommodation, landlords are finding they can increase rental figures in line with the demand for their properties. In total, the buy to let market is worth over £1 trillion, and industry experts are predicting the value will continue to grow.
Savills believe rental prices in the UK will rise by double figures by 2024, with 2021 seeing the largest amount of growth. However, key locations in the UK are expected to far surpass the national average. Prime examples of this are cities such as Birmingham, where rental figures are expected to rise by 16%, and Manchester with a predicted growth of 16.5% by 2024.
It’s no surprise that rental figures are increasing. Nearly 4 in 10 Millennials are still privately renting by the time they reach 30 years old, and approximately a third are expected to continue renting well into their retirement.
However, it’s not just Millennials who have taken to the rental lifestyle. A record 1.13 million over-50s are renting their properties, which is nearly double the amount from 10 years ago. As this demographic continues to favour renting, it will carry on providing a huge boost to the rental market.
Property Prices are Growing
Alongside rental figures, the sale price of properties in the UK is increasing as well. Between September 2019 and September 2020, it was reported that house prices rose by 5.5%, representing the highest growth rate in four years. According to Rightmove, price growth will reach its pinnacle in the New Year with a 7% increase.
JLL, Knight Frank and Savills are also predicting property prices to grow over the next four years with prices climbing by an average 15%. However, many regions in the UK are likely to surpass these predictions. The North West of England is forecasting an average growth of 23% with prices in Manchester expecting to reach 24%.
Outside of the North West, the Midlands and Wales are anticipated to perform higher than the national average with property prices expected to grow by 18.4% and 17.7% respectively.
A Safe & Secure Market
The UK is well known for having one of the most mature and secure property markets in the world, which greatly increases investor confidence in the country.
UK property laws are strict and detailed in order to protect homeowners and buyers. Some of the ways in which you could be protected include:
- The seller has to prove they are the legal owner of the property
- Offers are not legally binding until contracts are exchanged
- You can place restrictions on your title deed to prevent fraudulent sales or remortgages going through on your property
In order to prevent money laundering, the UK takes a tough stance. Real estate companies have to comply with the anti-money laundering (AML) legislation, and estate agents can play a key role in preventing fraudulent spending by:
- Carrying out risk assessments
- Having a money laundering reporting officer (MLRO) as part of the business to ensure compliance
- Retaining copies of due diligence reports for up to five years
Because of the laws in place and the commitment to reducing fraud, the UK is recognised worldwide as a safe haven for investors.
The built environment in the UK contributes approximately 40% of the country’s total carbon footprint, but drastic measures are being taken to reduce this. New build properties are now being constructed to be as carbon neutral as possible through measures such as installing high quality insulation and using renewable energy sources including wind and solar.
As part of the Government’s initiative to reduce greenhouse gas emission to net zero by 2050, a Green Homes Grant scheme was rolled out in September 2020 and will run until March 2022. This allows homeowners and residential landlords to apply for a voucher that will go towards the costs of making their property more energy efficient. Vouchers will cover two-thirds of the cost of eligible improvements up to a maximum of £5000.
The Treasury has predicted this will save households up to £300 a year on energy bills, and the improvements could cut carbon emissions by half a megaton per year, which is equal to taking 270,000 cars off the road.
Some of the improvements that can be made with the help of the Green Homes Grant include:
- Wall, floor and loft insulation
- Heating pumps and energy efficient boiler installation
- Double & triple glazing to replace single glazed doors and windows
- Water tank installation
As a leading powerhouse, the UK appeals greatly as a place to work, study and invest. In 2019, over 715,000 people moved to the UK in total, with 458,000 coming over for work and family reasons.
According to the Office for National Statistics, 12% of the NHS’s workforce alone consists of non-British nationals, which means 228,000 immigrants have found work as:
- Hospital porters
- Cleaners etc.
A British education is highly respected all over the world, and this is increasing the amount of international students the UK sees nearly every year. Around 257,000 students in the country come from overseas, which has created a boom in the student accommodation sector.
Foreign Direct Investment (FDI) has also increased over the years, hitting over £1.5 trillion in 2018. In the last two years, the UK has seen a 5% increase in FDI projects, including 432 digital tech projects in 2019, which is more than France and Germany achieved combined.
As the UK has continued to grow, certain regions have become a mainstay for internationally renowned companies. In Manchester alone, 85% of the FTSE 100 businesses have a presence in the city including:
UK-Wide Regeneration Projects
Regeneration projects across the UK are a huge contributing factor to the expansion of major city centres and the surrounding areas. One of the UK’s leading projects is the introduction of the HS2 railway, which will connect the North with the South. It’s estimated a train journey on the HS2 between Manchester and London will take as little as 67 minutes.
With HS2 in place, the UK will become a connected country, which will contribute greatly in improving the job market and increasing domestic tourism. The scheme is also predicted to create 40,000 new jobs, 13,000 new homes and one million square metres of retail space.
One of the main reasons the HS2 project is so highly anticipated is that it forms a part of the Northern Powerhouse Initiative, the Government’s vision to boost economic growth across the major Northern cities:
When the scheme is fully in place, the Northern economy is set to thrive, with a highly-skilled population and globally competitiveness in a diverse range of industries.
Alongside HS2 and the Northern Powerhouse Initiative, localised projects are having a huge benefit on the UK’s economy. A prime example of this is “The Liverpool Waters” project, which is seeing £5.5 billion being invested into the city, creating thousands of jobs and improving infrastructure.
Paradise Birmingham is another scheme helping the economy, that will see 1.8 million square feet of Grade A office space, retail and leisure spaces being built in central Birmingham.
The Weakened Pound
The UK’s currency is generally very strong, but it has fallen in value since the 2008 banking crisis and start of Brexit announcements in 2016. For international investors, this has created a great opportunity to get more from your money when investing in property. When the UK pound drops, other currencies — such as the dirham and the Hong Kong dollar — tend to grow in value.
In order to help with economic stability, interest rates in the UK reached an all-time low of 0.01% in 2020. As it stands, this means property investors can secure excellent rates on their mortgage deals.
To further boost property prospects in the UK, the country’s Chancellor Rishi Sunak cut Stamp Duty Land Tax from 5% to 3% on property purchases up to £500,000. These reductions are only expected to stay in place until the 1st of April 2021, so it’s important to invest now in order to take advantage of the huge savings.
You can find more information on this subject by reading our article on how to capitalise on the weak pound rate when buying property.
The Advantages of Property Investment in the UK
There are multiple reasons why you should consider making an investment in the UK property market. The country has one of the strongest and safest markets in the world, and hundreds of thousands of people choose to make the UK their home every year.
However, there aren’t enough affordable and suitable properties on the market to cope with the surging population, which means investors have a great window of opportunity to capitalise on the high demand.
Treo Investments specialise in sourcing some of the best property deals across the UK. Whether you’re looking to purchase student accommodation, a traditional buy-to-let or an off plan property that will grow in value, our mission is to find the right type of property that will suit your investment goals.
Learn more about the exciting deals we have on offer and how we make investing in property hassle-free, by getting in touch with a member of our team today.