Both the UK property market and the economy more generally have been under a significant period of change over the past two years, but as economic recovery is underway there are plenty of opportunities for investors.
For instance, a recent report by estate agents Hamptons entitled The End of the Cycle revealed that ‘economic growth (GDP) of 4.8% in the second quarter of 2021 underlines the strength of the UK’s post lockdown recovery.”
We have shared predictions for house price performance, buyer confidence and other key factors in recent blog posts, but it’s important to assess what the implications are for international investors considering the UK market. This blog will explore the impact of low supply, build-to-rent opportunities and a fall in the value of the pound.
Demand outstripping supply
The supply of high-quality homes, especially affordable homes for first time buyers, has long been an issue in the UK. As the BBC revealed, “in the 30 years to 2021, three million fewer properties were built than in the previous 30. The population, however, has increased by more than nine million.”
These issues in supply mean that investors that can secure properties that meet the requirements of buyers or renters, including space to work from home and access to gardens or balconies, can benefit from strong demand and likely a quick transaction.
It is also causing a rise in value of housing stock, so for existing investors this is good news when they come to re-sell. In fact, the Hampton report also revealed that “by 2024 the average house price is forecast to be 13.5% higher than today.”
The rise of build-to-rent opportunities
As we revealed in March 2021, the build-to-rent sector experienced significant growth in 2020, as the number of completed homes “increased by 23% from 43,598 in Q4 2019 to 53,720 in Q4 2020.” Renters are increasingly seeing the appeal of high-quality, modern homes with additional extras like a concierge and onsite gym.
Rental performance more generally has also been strong with “rental growth in six of Great Britain’s eleven regions rising at a faster rate for a decade.” However experts believe that while rental yield growth may slow, particularly in London, regional towns and cities are well placed for future rental growth as we progress into 2022 and beyond.
Fall in the pound
After the pound having a strong start in 2021, The Financial Times revealed on 28 September that “the pound sank to its lowest point in eight months”, falling as much as by 1.2% against both the dollar and the euro. Analysts are attributing this fall to a combination of the fuel crisis and Brexit-related labour shortages, which are unique to the UK.
While wider economic recovery in the UK is looking promising, there are fears of poor growth and higher inflation as a result of the drop in the pound. However, international property investors will have a sense of urgency to invest in the UK while the pound remains weak, and they can get more for their money. These investors will also yield a better return on investment as the pound gets stronger.
GRE Assets has been delivering high quality, well connected homes in the UK and Spain since 2006.Date: 8 October 2021