Supply and Demand Outstrips Brexit Concern
While the Brexit vote may have created an aura of uncertainty around the UK, the property market has remained fairly resilient. Brexit has had little effect on the overall direction of the market and although the sector continues to have its own positive and negative trends, it remains relatively unaffected by recent political events.
In SevenCapital’s recent Brexit survey, nearly 69.5% of investors continue to invest in the UK despite Brexit. Similarly, nearly 95% of the Hong Kong respondents believe Brexit isn’t a critical factor in their investment decision, instead relying on the potential returns and good exchange rate.
Despite the perceived instability, the Sterling has risen in value and demand has grown – for both investors and tenants. The threat of a property crash that many predicted seems to have disappeared, prices have stabilised and even risen in the case of cities such as Birmingham and Manchester.
Driven by inwards investment and incredible developments across the landscape, these regional cores are building the ideal places to live, work and play, driving rental yields up to as much as 10% in high-performing areas.
The wider problem the UK is facing is a chronic undersupply of property. There is a shortage of residential property to meet the young, growing demand, a problem if you’re looking to buy a home but favourable if you own or you’re looking to own an investment property.
City centre living, in particular, is growing in popularity, meaning residential property in the heart of active centres is becoming much more competitive – whether it’s still being developed or completed and tenanted. It’s no surprise that supply and demand drive property investment, creating new opportunities for the savvy investor within investment hotspots.
If you own property in an established area experiencing regeneration or an emerging market, you’re going to be seeing incredible demand – mitigating void periods and increasing the potential returns. These regional cores are making improvements to their infrastructure, transport, commercial and business growth, meaning more opportunity and more people seeking to take advantage of that opportunity.
This is apparent in areas such as Birmingham, which is still experiencing residential undersupply – between 2011 and 2016 for example, around 8,000 homes were completed in Birmingham whereas demand was closer to 20,000.
With the population of many cities set to grow alongside demand, experts are predicting that Birmingham alone will need nearly 100,000 additional households over the next 20 years. For investors, this translates into a huge number of tenants looking for rental opportunities, particularly as city centre living and ‘Generation Rent’ continues to grow in popularity.
While this does mean a more competitive market, it also means that investment properties will perform better, especially if they’re surrounded by the amenities that attract residents. Increasingly, many developers are also looking to create luxury, ‘smart’ apartments that utilise high-end appliances and stunning interior design, fulfilling the demands of this new wave of tenants.
For investors, undersupply is an issue that can lead to an incredible opportunity. By finding the right investment property in the right location, investors can increase rental income and capital growth, taking advantage of a competitive market to deliver much higher maximum returns. This is demonstrated by the headline statistic from the SevenCapital Brexit Survey – 85% of investors are currently investing in the UK market, highlighting how UK property remains an attractive, stable investment for high-net-worth individuals and investors.
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