Real Estate Investments in UK determined by a number of factors

Real Estate Investments in UK determined by a number of factors

18 Jan 2019

There are a number of factors influencing real estate sales, prices and rents in the UK such as Brexit, change in stamp duty, and levy on foreign ownership, taxation and new rules regarding Buy-to-Lets.  There are some new issues such as oversupply and inflated market values in some residential markets responsible for the stagnation of sales.  Brexit uncertainty may end by mid-2019, and then, the prices may amend to adjust to the new realities, and completion of Brexit can also lead to increase in the number of transactions in the market. 

Price can increase, in case, interest rates reduces, which can lead to higher liquidity in the markets. Buy-to- let continues to attract. In 2018, the number of landlords grew to 2.5 million (in 2011 -2012, the number of landlords was 1.97 million) and average returns delivered by buy-to-let properties is up to 9.9 per cent since 2000. Some areas are attracting foreign buyers who are investing in residential properties and leaving it empty as the value continues to increase. One-third of the UK homes sold in 2018 for price £1m or more were bought by foreign buyers, mostly, as a second home, where the risk of levy can increase rates in the investment markets, in the coming months. 

Rents Increase Outside London 

Rents reduced in London due to lower demand for homes in the capital city from EU migrants and there is also evidence of higher migration of people within the UK from London.   London property market value is £1.77 trillion, which is over four times the combined value of regional cities – Birmingham, Edinburgh, Manchester, Bristol, Liverpool, Cardiff, Glasgow and Sheffield. Rents increased outside London, highest in the Midlands this year. 

In 2017-2018, 222,000 new homes were constructed, which were far below the promised 300,000. The failure of government to build more homes and growth in population created a shortfall. Brexit remains to be a problem for real estate markets where uncertainty is causing delays in transaction.  

Where to invest?

In the current year, buyers need to identify the areas where property investment can provide desired returns and rental yields. There are some regions in the South where oversupply led to lack of capital growth, but, in the North, the price continues to grow. The market will continue to see growth, until; the supply is lower than demand.

The West Midland had one of the strongest growths across UK where the prices grew 4.6 per cent, as per ONS figures, although, overall in UK, the prices grew 2.8 per cent in the month of November from 2.7 per cent in October 2018.  

Other regions witnessing strong price growth are East Midlands- 4.4 per cent, South West -4.3 per cent and North East - 4 per cent up. In Wales, the price grew 5.5 per cent per annum, and it was one of the largest annual growths. Scotland price increased 2.9 per cent in the year. 

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