With positive house price growth, strong demand and low interest rates, the UK has proven itself as a popular place to invest in property over the past couple of years, despite the challenges brought on by the Covid-19 pandemic.
This blog post will provide an update on the landscape for investors considering the UK property market as a place to expand their portfolio in 2022. We have identified the key factors which are influencing property investment, including economic indicators, interest from abroad and rental performance.
There are several economic indicators including Gross Domestic Product (GDP), employment figures and interest rates, which can often act as a guideline for how the property market is performing.
Latest data from the House of Commons showed that in 2021, GDP growth in the UK was 7.5%, the highest in the G7 Summit. While this is partly indicative of recovery from the GDP decline experience in 2020, the figures are heading towards pre-pandemic levels, which is positive. A similar story can be said for employment levels, with the three months to January 2022 seeing an employment rate of 75.5%, which is 0.2% higher than the previous period and only 1.1% lower than pre-pandemic levels.
Back in March 2020, the Bank of England reduced its base rate to 0.1% to help ease the economic implications of the pandemic, which was good news for those looking to buy in the property market. On 17 March 2022, it was announced that interest rates would rise to 0.75% in response to challenges around inflation. It is important to note that the Bank of England has signified that it could rise to 1.5% by mid-2023, which suggests time is of the essence for buyers and investors wishing to make the most of historically low interest rates.
Interest from abroad
The value of inward Foreign Direct Investment (FDI) in the UK reached £1.6 billion in 2019 and has been remarkably resilient despite the Covid-19 pandemic since. This inward investment is not only visible in the continued programme of regeneration across the UK, but is also seen in global brands such as Amazon, Microsoft and PwC opening headquarters in regional cities. Regeneration and job opportunities help drive residential demand, which is encouraging news for property investors considering the UK.
The value of the pound has an impact on interest from overseas investors, as when the pound is weak UK property is more affordable to overseas investors. With the recent announcement of the increased interest rates, GBP performance against EUR has slumped and while rates are fluctuating given the ongoing crisis in Ukraine, the exchange rate is certainly one to watch for investors.
Having operated since 2006, GRE Assets has first-hand experience of operating through economic crises and has seen the consistent performance of rental property in the UK. This appears to be truer than ever with the market experiencing an undersupply and demand remains higher than ever.
In its UK Residential Forecasts 2022-2026 report, JLL predicted a 2.5% rental value change per annum in both 2022 and 2023, showing ongoing growth in the market. Likewise, Track Capital’s research into rental yields identified Manchester, Nottingham and Bradford as among the top rental locations in the UK, each with average yields of over 10%. It is worth looking into these figures as they can signify what returns investors can expect from different property locations.
GRE Assets has been delivering high quality, well connected homes in the UK and Spain since 2006.