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Why Invest in UK Property?

Last updated January 2018

The UK is one of the very best and most stable property markets in the world with its capital London being one of the great property investment capitals of the world. There has been a degree of uncertainly since the UK voted to leave the UK but the basic fundamentals for the UK are very strong and the cost of leaving the EU has already been discounted into the economy and exchange rate.

Some of the best reasons why it may be a great time to buy physical property or invest in funds with UK real estate exposure is the weaker pound means UK homes and other properties are 10% less expensive in dollar terms and that is obviously if you are not already based in the UK.

UK PROPERTY MARKET

House prices in UK are still rising (though not in inflation-adjusted terms). The average house price in the UK rose by 2.8% (0% inflation-adjusted) to £209,971 (US$ 273,046) during the year to Q2 2017, based on the figures from Nationwide. Previous quarters had seen rises of 4.1% in Q1 2017, and 4.5% in Q4 2016.

In London prices decelerated sharply, with price rises of only 1.2% (-1.5% inflation-adjusted) during the year to Q2 2017.  London is the second weakest region in the country after the North, according Exclusive Hot Properties

Supply of houses to the UK's market has hit a record low. Newly agreed sales have also fallen, as buyers have taken a more cautious stance in recent months.

The highest price rise was in East Anglia, with house prices increasing by 5.04% during the year to Q2 2017. It was followed by South West (4.43%), North West (4.13%), East Midlands (4.11%), and Northern Ireland (3.80%).  A net balance of 7% of respondents in RICS's Chartered Surveyors' survey believed that house prices are rising, down from last month's 17%.

The North had the weakest growth of 1% y-o-y in Q2 2017. House price growth was also weak in Wales (1.40%), and Scotland (1.72%).

The weakness in the government following the election is "stifling" the country's housing market, respondents to the RICS´s UK Residential Market Survey suggested in June 2017. Around 44% of RICS respondents felt that the weakened activity in the housing market was due to the country's uncertain political climate. Only 27% of them identified Brexit as the biggest factor for the market slowdown.

RICS's survey respondents saw London prices softening, especially in the most expensive areas. Aside from political uncertainty, respondents in London also equally cited Brexit and changes in Stamp Duty as factors contributing to the housing market's flat activity.

"London is slowing more dramatically than the rest of the country, as it is more exposed to changes in sentiment due to house price growth over the last 10 years and what that did for affordability," says Savills' head of residential research, Lucian Cook.

The UK's and particularly London's previous dramatic house price rises were fueled by four factors:

 

 

  • Immigration and population growth have been strong, especially in London.
  • Interest rates have been at record lows, with a large expansion of the money supply through “quantitative easing”.
  • The City of London (London’s financial center) continues to boom.
  • There are no restrictions on foreign ownership of properties in the UK.

WHAT TYPE OF PROPERTY INVESTMENTS ARE AVAILABLE IN THE UK?

For the would be property investor there is a wide range of different types of property investments that include the following:

  • Residential Buy to Let Properties
  • Commercial Investment Properties
  • Commercial Business Properties such as Hotels and Care Homes
  • Student accommodation
  • Holiday Resorts
  • Fractional Ownership products
  • Guaranteed Rental products

Within these sectors there are developers who have created investment vehicles for smaller investors to invest into these areas but for generally a small amount of money. Such investments include individual Hotel Room Investment, Student accommodation and similar. However the main investment even from small investors seems to come from buy to let properties and commercial investment properties. The great thing about the UK Property Investment market is there is a range of products for investors to invest into giving the investor far greater choice than they have in some other property investment countries.

INVESTMENT CONCLUSION

When you consider UK yields and capital appreciation in property assets as a whole in what is one of the world’s great economies the UK has a lot to offer potential investors especially those from Asia who are looking to invest in new markets. If you would like any advice or assistance in which UK property investments represent the best value or are seeking something specific please fill out the contact form and one of our property specialists will contact you to discuss your requirements with you in detail.

 

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