Since the UK began to emerge from lockdown, the property market has reacted positively, with recent reports confirming a ‘mini boom’ in activity and the average time to sell for homes coming to market reducing by 31%, according to SevenCapital.
But how is this possible when the previous recession saw property prices crash? The UK developer says the 2008 recession was ‘financially-driven’, while today’s recession is driven by a public health crisis.
This means the government made a conscious decision to shut down certain markets, whilst putting measures in place to support businesses and individuals affected. Measures were also introduced to help prop up and restart the housing market.
While it’s uncertain if this quick recovery from lockdown will continue for the remainder of the year, SevenCapital says there are numerous reasons why investors should continue to buy into the UK market.
1. Positive UK house price predictions
Savills' five-year house price forecast predicts UK prices to grow 15% on average by 2024. London falls well below this at 5%, however, so investors looking for higher growth will want to look to regional cities.
2. UK undersupply drives demand
As the UK has already started to recover from lockdown, demand for homes has increased, and Hometrack’s latest report states that the supply/demand imbalance is supporting the headline rate of growth – resulting in the time to sell a home falling 31% since the lockdown.
3, Rental returns set to rise
Alongside rising house prices, rents are also expected to increase. Rental growth in the South East is expected to hit 11.5% and in Birmingham in the West Midlands, rents are predicted to hit 12.5% between now and 2023.
4. Reduced SDLT until March 2021
In a move designed to protect and revitalise the property market, the government announced a stamp duty holiday on all property purchases up to the value of £500,000 between July 8 2020 and March 31 2021. Although for investors the 3% additional property rate is still in effect.
5. Living trends point to renting
According to the Resolution Foundation, nearly four out of 10 millennials are still privately renting at age 30, while nearly a third of the wider generation are expected to be renting well into retirement. In fact, research estimates that UK renters will outnumber homeowners by 2039.
6. Low interest rates
After two successive cuts in March 2020, the Bank of England base rate remains at a historic low of 0.1%. This means that many lenders are offering incredibly competitive buy-to-let mortgage rates and a raft of new products, making the investment process much more accessible.
7. Rapidly increasing population
The UK’s population is forecast to reach 74 million people in the next 20 years – a clear sign of the vast housing demand building within the market.
8. Top European city for property investment
Second only to Los Angeles in the US, London is the best city in the world to invest in property, according to the Global Cities 30 Index. This success has caused a ripple effect on the wider UK market, with areas across the London commuter belt seeing a surge in investment.
9. Number one for transparency
The UK was named the ‘most transparent’ market in the world in JLL’s 2020 Global Real Estate Transparency Index. JLL says the top transparent markets ‘push the boundaries of transparency through technology, sustainability, regulation and tracking of alternative sectors’.
10. Value through for foreign exchange
For international investors looking to invest in UK property, the current weakness of the pound continues to be an opportunity to save money in the long-term, especially in a market where prices are relatively affordable compared to other global property markets.