Since 2000, the average property price in the UK has increased from circa £80,000 to £230,000. The introduction of the buy to let mortgage and an influx of overseas investment to prized markets such as London and Manchester, meant returns only solidified – and that growth is set to continue for property for sale in the UK for the foreseeable future.
One recent forecast suggested anyone investing in UK real estate right now can expect to watch the value of their asset grow by an average of 21.5% by 2025.
Of course, there is substantial regional variation within the market and with the aid of expert knowledge, investors can realistically be hoping for capital gain alone of almost 30%.
|UK region||Growth to 2025|
As the above figures highlight, although a relatively strong market still, London no longer is considered the UK’s prime investment location – many of the issues associated with it stem from restrictively high purchase prices that limit both medium term capital gains and yields.
Meanwhile, regional cities with a lower price floor – especially those backed by wider foreign and infrastructure investment – look set to be the most buoyant markets.
The outlook for rental returns is similarly rosy.
Currently, investors can expect an average UK rental yield of about 3.5%. However, again there is significant variation between markets and regions and it is not uncommon for investors to achieve annual yields of over 6%.
Next year alone current forecasting states average rental prices for a UK investment could rise by 2% and by the end of 2025 you could expect a further 8.5% increase.
It’s worth highlighting once more that regional variations will dictate overall ROI for investors and some markets such as the West Midlands could see rental returns rise by 12% over the next five years.
Much of both the historical and forecasted investment performance of UK property can be attributed to its unique supply and demand dynamics.
On the most base level, population growth in the UK has far outstripped the supply of new property, and further nuances such as a demand for city centre living and a thriving private rental sector have also contributed.
Right now, these dynamics are exacerbated, and it could represent the start of another growth spurt. Locked-down construction during COVID-19 further restricted housebuilding activity. In fact there was a 25% fall with only around 150,000 new properties being built in 2020.
These figures must be put in the context of demand. In the UK, at least 250,000 new homes must be built annually simply to keep up with population growth and replace old unwanted stock.
It’s one of the biggest discrepancies between supply and demand in recent history. When you consider that homebuilding in the UK began to stagnate at an average of 186,000 at the end of the 1990s to instigate much of this investment growth, you could expect prices to rise more sharply in the future as the shortage becomes more acute.
This is especially pertinent given the pent-up demand set to be unleashed in 2022.
UK Finance, the main trade body for UK banks, stated home-buying activity is now at its strongest levels since 2006.
It explained the first few months of the pandemic – a time when the UK property market was largely shut down – led to ultimately incorrect predictions that there would be a downturn. In fact conversely, performance has been very different, with “Covid-era activity set to eclipse everything since the credit crunch”.
Most real estate assets across the UK would probably turn out to be a good long-term investment – especially if you could achieve regular tenancy and minimise void periods.
However, there is considerable variation across markets – variation in purchase price, yield and capital appreciation.
It’s widely accepted that in the medium to long-term tier one regional markets such as Manchester and Birmingham currently offer investors the biggest ROI prospects.
As longstanding experts in UK property for sale, Chestertons not only has an intricate understanding of what makes a successful acquisition, but actively source these opportunities to make investment easier for those overseas.
We currently have properties for sale in the UK in the most prized markets of London as well as Manchester and Birmingham. Should you be interested in adding UK property to your portfolio, please get in touch and we can discuss your needs and requirements.