Property has a reputation for being a safe investment, and the UK is one of the strongest and most reliable countries you can invest in. Not even the uncertainty surrounding Brexit, nor the Coronavirus pandemic could halt the UK property market going from strength to strength. As it stands, property investors with UK assets are set to enjoy one of the strongest and fastest growth periods in years.
Now is an excellent time to invest in UK property. A once-in-a-lifetime mix of political events, global circumstances and a booming population has created a property market like no other in the world today. To the right investor, this means low costs, high rental yields, an increase in capital growth and an investment that will provide you with significant value.
Experts worldwide see value in UK property, and the facts speak for themselves. In this article, we’ll explain the reasons why property experts are recommending the UK to investors around the world.
The Future of UK Property is Bright
2020 sparked a short-term dip in the UK housing market, as estate agents struggled to showcase properties to potential buyers and renters, with social distancing measures in place. However, that dip was quickly reconciled thanks to innovative solutions.
Agents arranged property viewings with help from technology. The UK has seen more virtual viewings this year than ever before, and it helped bring a renewed sense of confidence into the market. The Royal Institute of Chartered Surveyors reported an 87% rise in new property enquiries in July, followed by an 80% increase on new instructions. As faith in the market continues to build, Savills predicts this will result in higher residential property prices year on year.
By 2024, the average house price growth in the UK is expected to increase by 15%, but many regions will far surpass this prediction. The North West of England ranks number one in the price forecasts, as house price growth is expected to reach 23%.
It’s important to remember that these predictions don’t take into account individual cities within the regions. As an example, Manchester house prices could even surpass the North West’s average, reaching as high as 24%.
The Midlands and Wales are also anticipated to exceed the national average with five-year forecasts reaching 18.4% and 17.7% respectively. Knowing the right areas to invest in should always be at the forefront of the due diligence process, so make sure you thoroughly review the UK’s regions before deciding on a place to invest.
A Low Supply and a High Demand
One of the main reasons why the UK rental market performs so well is the lack of residential property available. New build projects are being commissioned, but demand far outweighs the amount of residential property being constructed. There also aren’t enough homeowners who want to sell their properties. According to a Legal & General survey, 25% of prospective buyers are looking to make a purchase this year, but only 4% of current homeowners are definitely looking to sell.
This has created a prime opportunity for investors, as people in the UK see renting as the easier option. When you take into account the fact that many are also willing to pay a premium rate to secure quality property, you’ll find the value of rental properties in the UK are staggeringly high.
Metropolitan cities with dense populations that grow year on year are falling behind other areas in the UK in terms of supply. As a result, investors are finding they can increase their rental figures in line with demand. In key city centres across the UK, investors can achieve average rental returns of 7%, making it an attractive proposition for their property portfolio.
Nation-Wide Regeneration Projects
As the UK continues to grow, regeneration projects are helping key cities to expand while boosting localised areas. One of the biggest projects currently underway in the UK is the HS2 railway, which will allow for greater and faster transport around the UK. The BBC reported that the estimated time it would take to travel between London and Manchester is 67 minutes. The scheme is also predicted to create 40,000 new jobs, 13,000 new homes and one million square metres of commercial space.
With HS2 in place, businesses can find more affordable cities to base themselves in, and skilled workers will no longer be limited to finding work in their local area. Domestic tourism will also improve, as people will be able to travel more of the UK in a much shorter time.
It’s not just the HS2 railway that’s having a positive effect on the UK. Major cities are taking action, securing their economies for years to come. Take the Northern Powerhouse, as a prime example. Cities such as Liverpool, Manchester and Leeds are leading from the front with game changing regeneration projects.
The Liverpool Waters Project, is seeing £5.5 billion being invested into the city, creating thousands of new jobs and new infrastructure. Cities such as Birmingham and Manchester are fighting for the right to be called the UK’s second city, firmly establishing themselves on the international stage. Events such as the 2022 Commonwealth Games are taking place in Birmingham, and these events are creating thousands of new jobs and regeneration schemes across the city.
A Growing Population
The UK’s population is growing at an incredible rate. Within the next 20 years, it’s predicted 74 million people will call the UK their home. This means the population is expected to grow by 300,000 people every year until 2040.
As you might have guessed, it’s the busy cities that are predicted to have the biggest booms in population. By 2026, Manchester is expected to have an additional 75,000 permanent residents, which is a population growth rate three times higher than the national average.
Liverpool is another city on the rise, as the area expects a population growth of 50,000 within 20 years. To keep on top of property supplies, this means an additional 30,000 new properties have to be built in Liverpool by 2030, or else the demand will continue to outweigh the amount of properties on offer.
Interestingly, the UK doesn’t just have a growing population; it has an ageing population as well, which is creating more opportunities in the rental sector. Over 1 million people in the UK are over 50 years old and renting their property, which is nearly double than the amount of over 50s who were renting back in 2010.
25% of the UK is expected to be over the age of 65 by 2050, and with the shift towards older generations preferring to rent, there’s a lot of potential for investors to gain a foothold in a market that’s on the rise.
Post-Covid Property Boom
The Coronavirus pandemic has altered the way we live, and during this time many people are re-evaluating their living arrangements.
Estate agents have seen a sharp rise in people looking for properties with some form of extra space, and this trend is expected to continue post Covid. More workers want to create a comfortable home office environment which is benefiting city centre projects, especially those that offer a co-living community. There’s also been a growing demand for properties with outside space. With people having to be cautious when they venture out, many have realised how important it is to have a garden so they can step out for some fresh air whenever they please.
Finally, the concept of staycations has found roots in the UK. As the list of countries being added and removed from the UK’s travel ban seems to change on a daily basis, plenty of UK residents have decided to take vacations in their home country. As such, the amount of serviced accommodation apartments and holiday lets being booked for short-term breaks has skyrocketed in the last few months.
The Weakening Pound Sterling
The UK’s currency has always been strong, but it has certainly fallen in value since the economic crash in 2008 and the announcement of Brexit in 2016. More importantly, when the pound rate weakens, other currencies tend to grow in value, which is great news for property investors from around the world, including UAE, Hong Kong, Saudi, China.
To keep the economy stable, interest rates in the UK reached an all-time low of 0.01% this year. This means property investors can take advantage of highly competitive mortgage rates.
As a further benefit to property investors, the UK Chancellor Rishi Sunak reduced Stamp Duty Land Tax to 3% on property purchases up to £500,000. However, it’s important to remember that these reductions will only be in place until the 1st of April 2021, so an investment made in the near future, will provide you with additional savings.
For more information, take a look at our article on how to capitalise on the weak pound rate when buying property.
The Value of UK Property Versus the Rest of the World
The UK is one of the best countries in Europe for foreign investment. London topped the Global Cities 30 Index as the number one city in Europe for investments, and number two across the world. No other city in Europe even broke the top ten; the closest was Paris which came in at No. 14.
London’s success as a property investment hotspot has also had a positive impact on the wider area. The London Commuter Belt is more affordable for young families who need to live in close proximity to the UK’s capital, which has seen a surge in demand for property in areas such as Bracknell, Slough, Luton and Brentford.
International Confidence in the UK Market
International investors have already seen the tremendous potential value in UK property and are continuing to build on their portfolios. In the purpose built student accommodation (PBSA) market alone, £1.68 billion of investment has come from overseas, which is more than half of the total amount invested in the market. Singapore Press Holdings (SPH) has one of the largest portfolios worth over £448 million, and other countries from Asia and the Gulf Cooperation Council are looking to take advantage of the rising popularity of UK-based PBSA.
Build-to-Rent (BTR) property is also proving hugely popular among foreign investors. Peter Burns, the Head of UK Development & Residential Capital Markets at CBRE said domestic investors have made significant deals, and international investors are looking to follow suit. According to Burns, new investors see more value in UK property than they do in other European centres.
CBRE has forecasted residential investments will increase by 30% by the end of 2020 with a significant amount of input coming from overseas. As developments become more popular in metropolitan areas, it’s expected the smaller towns and cities in the UK will soon see a huge growth in demand for BTR.
Why Invest in UK Property?
The UK is one of the best locations in the world for property investments due to the rising population and the lack of residential property currently on the market.
When you take into account the value for money you can achieve on the weakened British currency and the amount of regeneration projects that are underway to improve the country, it becomes clear that the answer to “Why invest in UK property” is a simple one; you can make an excellent return on your investment.
Treo Investments has access to a variety of property deals across the UK, in many of the UK’s high performing property investment hotspots. Whether you’re looking to invest in student accommodation or the buy to let sector, we take the time to understand your needs. With this tailored approach, we can present you with the most suitable opportunities.
To learn more about the exciting opportunities we have available, contact a member of the Treo Investments team today for more details.