Many investors have been out off investing in UK property as Brexit is bringing about more and more political uncertainty as the rescheduled exit date draws closer. Stories of stagnating house prices, falling yields and lower volumes of people moving house are all over the headlines, but how much of this can you actually believe, and how much of this is affecting the investment side of the property industry? You may be surprised...
Many recent headlines have taken the stance that house prices, particularly the prices of apartments are plummeting. However, if you look into the actual figures there isn't any decrease, it's simply a case of the market slowing down while uncertainty around whether we will leave the EU with a deal or not looms overhead. Nationwide recorded an annual property price increase of 0.3% in July this year from July 2018, and the ONS/Land Registry recorded rises of 1.2% in the same time frame. Banks such as Halifax even recorded rises as high as 4.1% in their target market.
With the property market fluctuating all the time, it's difficult to predict what property prices will be like in two or three years' time (the standard length of assured returns on investment property). While investors may be reluctant to purchase right now while Brexit is around the corner, when their assured returns period has finished, Brexit will have been resolved two or three years previously, and the market will be in a much stronger - or at least a different - place.
While many headlines sow tales of falling house prices and a crashing market, the figures from numerous reports actually tell a very different story. Nationwide, on average, house prices are holding steady in many regions, however it does show a very mixed picture from region to region. In the South East and London prices are stagnating and showing little growth; in the East and West Midlands property is also showing a slow down in the increasing prices following an excessive growth since September 2012 (of 36.4% and 35.9% respectively); and in the northern regions the risk of price falls is looking highly unlikely, with steady continued growth since the referendum. WhileEngland and Wales as a whole has shown an eighth consecutive month of negative growth (with -0.1% growth in July 2019), this negative growth is minimal and doesn't represent the growth that can be found in the right regions, bought down by larger regions such as London which are suffering as Brexit looms.
Bricks and mortar is still one of the strongest investment options in the UK, especially in the capital. "If you go back a couple of decades, those who acquired property across the UK, but particularly in London, will now be sitting on bricks and mortar worth significantly more than they paid for it - and that isn't taking into account the rental yields achieved over the years. It's not that there haven't been peaks and troughs in the market with recessions occurring in most decades, but the long-term results have been the same" - Buy Association.
Where investment properties, and particularly buy-to-let opportunities, differ from other residential properties when purchasing as an owner-occupier is that the rental yields achieved should also be considered alongside the capital appreciation possible. With a buy-to-let property, while the overall capital appreciation may be slow due to Brexit (or other reasons), the returns you will be achieving over a two or three year period will be assured and guaranteed income for you. With less people purchasing houses and more people choosing to rent due to the condition of the property market currently - especially those who wish to live in city centres - the rent you can achieve from investment properties in the years following the initial assured return period will always outweigh the capital appreciation that we are predicted to see in the coming years. Since the referendum, we have already seen a massive increase in popularity in cities outside of the capital, especially in Birmingham, Manchester and Liverpool, where supply continues to struggle to keep up with demand.
The UK has always been a hotspot for property investment, and this is still appearing to be the case especially for international investors who are taking advantage of the low value of the pound (£) to 'bag a bargain' in the property market.
One of the most important factors to consider when investing in uncertain times is where you purchase. While in the past it was certain 'money-maker' to invest in London, this is no longer where the best yields and capital appreciation can be found, as more and more business and residents look to the north. There is hope for the capital, however, as a recent report from Home.co.uk found that "soaring rents" are tempting investors back to London's lettings market.
Want to know where is best to invest in the UK? Where can you find the most Brexit-proof and lucrative investment option for you? Give our sales team a call on 0161 3026732 to talk to us.