1. Positive UK House Price Predictions
The graph below shows the predicted house price growth of each UK region over the next five years. While this is a good indicator of the regions that are set to perform overall, it’s important to note that this doesn’t take into account individual success and many city cores in these regions are expected to over-perform against the national average.
As you can see, while London’s recovery has started, it will still fail to match the rises seen in key regional areas that are racing ahead of the national average, driven by new levels of inward investment and foreign investment that are creating incredible new developments.
2. UK Undersupply Drives Demand
The major driver in the UK rental market right now is residential undersupply. While this could be considered a challenge for renters, for people looking to invest in UK property it represents a prime opportunity to build solid returns and find incredible value. This is particularly true in the UK’s regional cores, where the market is incredibly competitive but still affordable.
With UK Buy-to-Let (BTL) worth over £1 trillion, research estimates that UK renters will outnumber homeowners by 2039 – driven by rapidly increasing house prices and a growing popularity for the flexibility that renting provides. For context, this represents nearly 125 million households in aprivate rented sector set to grow by 24% by 2021.
3. Rental Returns Set to Rise
It’s the continued regeneration and residential undersupply that is taking the UK rental market to new heights. As the market becomes more competitive and developments concentrate on delivering quality over quantity, rental prices are increasing.
This is directly reflected in some key areas across the UK. In our 2020 UK Property Market Forecast, the South East was forecast to see rental price growth of 11.5% over the next four years. Birmingham takes that one step further – rental growth in the second city was expected to hit 12.5% between now and 2023.
4. Reduced SDLT until March 31 2021
In an effort to revitalise the property market, reductions to Stamp Duty Land Tax (SDLT) have been announced on all property purchases made between 8 July 2020 and 31 March 2021, offering the average investor a saving of around £10,000.
The introduction of this tax break is an incredible opportunity for landlords ready to invest in UK property. All property purchases under £500,000 will now incur 0% SDLT, although the 3% additional property rate is still in effect.
5. Regeneration in the UK
Regional UK cities such as Birmingham, Manchester and Leeds are currently flourishing. With London prices rapidly increasing over the last decade, recent years have seen investors looking outside of the Capital for more fruitful alternatives. This has directly contributed to incredible developments set to improve connectivity (such as HS2) and more amenity-led projects providing residential, commercial and efficient mixed-use spaces.
Birmingham alone has, in the past decade, undergone a complete transformation, with the £500million redevelopment of its New Street station and £150million Grand Central shopping destination, major developments such as Paradise and Arena Central underway, and a planned £1billion regeneration scheme in anticipation of the arrival of HS2 in 2031.
6. Living Trends Point to Renting
The concept of ‘Generation Rent’ is well and truly in full swing across the UK, directly appealing to investors that want to build a long-term portfolio. According to the Resolution Foundation, nearly 4 out of 10 ‘millennials’ are still privately renting at age 30, while nearly a third of the wider generation are expected to be renting well into retirement.
Whether or not you see ‘lifetime renting’ as a bad thing, we’re definitely seeing a shift in culture to a more European way of thinking – only 43% of people in Germany own their home, for example. Going forward, it’s expected that similar ‘continental-style’ rules will be introduced that offer more flexibility and security for both landlord and tenant alike.
7. Low Interest Rates
After two successive cuts in March 2020, the Bank of England Base Rate remains at a historic low of 0.1%. This means that many lenders are offering incredibly competitive Buy-to-Let mortgage rates and a raft of new products, making the entire investment process much more accessible.
Obviously, this is excellent news for beginners looking to invest in UK property, potentially allowing them to start their own investment journey. However, it has the added benefit of ensuring that portfolio investors, especially those with multiple properties in multiple locations, can remortgage existing properties, release equity and leverage new investments.
8. Rapidly Increasing Population
The UK’s population is forecast to reach 74 million people in the next 20 years, a clear sign of the vast housing demand building within the market.
A quarter of the UK is expected to be 65 or older by 2050 according to the Office for National Statistics. This shift in demographics opens up huge opportunities for property investment – a record 1.13 million over-50’s are renting, nearly double that of a decade ago. While young professionals make up the majority of the rental market, there’s no doubt we’re seeing a renaissance in older people choosing to downsize, particularly in major cities.
9. Long-Term Growth Despite Lockdown
The majority of UK PLC’s have described ‘long-term optimism’ in various property market forecasts and, despite lower transaction volumes, the property market (including mortgage lenders) is in a much better place to bounce back than it was following previous crises such as the financial crash in 2009.
Thankfully, the rental market has adapted to the ‘new normal’ and the majority of letting agents have successfully re-evaluated their processes, delivering safer and more efficient viewings. The first week of April alone saw a 30% increase in demand for rental property, with 86% of buyers and renters still intent on following up on plans devised pre-lockdown.
10. Top European City for Property Investment
The UK continues to be a top choice for investors in the property market, led by London, which remains top of the Global Cities 30 Index in Europe. With the capital listed as the second-best city in the world to invest in property, narrowly losing out to Los Angeles, it remains the top destination in Europe to invest – Paris is the only other European city to make the top 15.
This renewed success has had a ripple effect on the wider UK market, driving new investment into key surrounding areas across the London Commuter Belt as well as major cities further north of the M25 such as Birmingham. This has directly contributed to renewed levels of regeneration, delivering brand new residential, commercial and mixed-use spaces.
11. Surging Foreign Direct Investment
Paying further testament to the UK’s appeal worldwide, foreign direct investment (FDI) has steadily increased over the last few years, hitting highs of £1.5 trillion in 2018. Since then, the UK has achieved a 5% increase in inbound FDI projects, cementing its position as the second best country in the region and ending three years of declining European market share since the referendum.
Despite falling one spot, the UK has surged ahead in digital tech, attracting 432 projects in 2019. This represents a 30% share of all European FDI tech projects – more than France and Germany combined.
12. No. 1 for Transparency
In the 2020 Global Real Estate Transparency Index by JLL, it emerged that the UK was the ‘most transparent’ market in the world, closely beating the United States, Australia and France.
JLL describes the top transparent markets as being the ‘world’s leading investment destinations… pushing the boundaries of transparency through technology, sustainability, regulation and tracking of alternative sectors’. This success demonstrates the steps the UK is taking to ensure a robust and secure market for those ready to invest in UK property.
13. UK Tech Leads the Way
The UK’s technology sector has always been recognised as one of the strongest in the world and continues to contribute to the wider economy, helping push innovation in PropTech while creating new opportunities for professionals.
During the entirety of 2018, venture capital investment into the UK topped £6 billion – the most of any European country. This continued well into 2019 and beyond, where the UK managed to beat its 2018 totals in just seven months while also overtaking the US for the amount of investment per capita.
14. Investment into Infrastructure
In the coming years, the significant investment made into UK infrastructure projects will begin to bear fruit – dramatically improving connectivity, transport links, house prices, amenities and employment opportunities across many parts of the country.
Crossrail is set to be a game changer for the South East, providing unprecedented access into London from nearby commuter belt locations. Since it’s announcement in 2009, house prices within a one-mile radius of its planned stations have increased in value by 66% on average.
HS2 is predicted to do the same for the Midlands, revolutionising transport links between Birmingham and the capital. The £106 billion project will create around 25,000 jobs by the time it arrives in 2030, significantly boosting the surrounding economy.
15. Value through Foreign Exchange
For international investors looking to invest in UK property, the current weakness of the pound continues to be an opportunity to save money in the long-term, especially in the a market where prices are relatively affordable compared to some other global property markets.
When measured against currencies in Asia for example, particularly in dollar-pegged regions such as Hong Kong and the United Arab Emirates (UAE), investors can maximise the value of foreign exchange rates to find incredible savings in areas that are forecasting exceptional growth.
16. Educational Credentials
The UK maintains one of the top educational sectors in the world, anchored by renowned institutions such as Oxford and Cambridge – both of which appear within the top ten universities in the world.
Outside of these two historic locations, universities in major regional cities such as Manchester, Edinburgh, Birmingham, Sheffield and Nottingham all make the top 100 universities in the world and have a major impact on the local economy; attracting international students and building ambitious graduate pools for local employers.
17. Property Remains a Stable Alternative
Even despite recent challenges such as COVID-19 and the impact of the Brexit vote, the UK property market remains a stable alternative for many investors. Our global survey towards the end of last year revealed that 85% of respondents invested in property still invest in UK property, despite the economic and political uncertainty highlighted by experts.
At the same time, property continues to be a leading asset for stability. When lockdown was first announced, the stock market crashed between 25% and 30% in March while the property market remained relatively strong. This is just one demonstration of how property has proved itself to be arguably one of the most stable, high-yielding assets for those seeking long-term alternatives.
18. Higher Demand, Broader Market
If there’s been one unexpected side-effect of lockdown, it’s that many people are currently re-evaluating their living situation. Whether they’re looking to move out of the family home or upgrade to a larger space, the private rented sector continues to grow.
At the same time, priorities are shifting. Tenants are looking for space, quality and long-term renting, especially in popular city-centre developments. This means there’s a window of opportunity to invest in UK property – where an amenity-led development in a prime location can demand a premium in a busy market.
19. Access to Quality Healthcare
According to the Knight Frank Global Buyer Survey, COVID-19 has radically changed tenant priorities and high-quality healthcare is now the second most important reason for a property move.
It should come as no surprise that during this time, more people are considering their lifestyle and health. This has put the UK firmly at the top of the three most desirable locations in the world alongside Spain and France – driven by its affordability and the quality of the healthcare it can provide.