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By Anna Clare Harper

CEO, SPI Capital


How house prices & rents will affect your property portfolio in the 2020s

For many years, residential property has been the default choice for investors looking to preserve and grow their wealth. In times of uncertainty, the stability it can offer is increasingly attractive as a way to protect and safely store value.

As for returns: in 2020, residential property seemed one of the few assets that consistently grew in value, encouraged by the temporary reduction in stamp duty. But what will happen to house prices and rents throughout the rest of the 2020s? And how does this affect what works and what doesn’t for UK property investors?

House price growth


Since Nationwide began to track house price records in 1952, UK house prices have doubled on average every nine years. House price growth through the 2020s seems likely, since supply is constrained and demand is growing. Indeed, Savills forecasts 20.4% UK house price growth over the next four years.

That said, the pace of growth is already slowing from the 6.4% growth Nationwide reported in the year to January, which was encouraged by the temporary stamp duty reduction.

Further, blanket house price growth seems unlikely, since the housing market is not one market. Some areas will grow more than others. The difference is based on those forces affecting demand and supply: where new homes are being built, where people want to live, where their jobs are and what they can afford. For example, Savills forecasts the North West will grow by 27.3% in the five years from 2020, compared with 12.7% for London.

How this affects what works for your investments in the 2020s will depend on your goal. We work with investors who want to preserve and grow wealth over time. One of the best things that long-term investors can do is to echo the principles of ‘value investing’ eloquently shared by investors like Warren Buffet:

  • Look at undersupplied markets with stable or growing demand where the ‘fundamentals’ of demand and supply, driven by jobs, are good

  • Buy at the right price, and hold - to benefit from house price growth, ‘time in the market is better than timing the market’.

Focus on stable and growth sectors to guide location and asset decisions. For example, trends that were already happening and have been catalysed by Covid include demand increasing from workers around the biomedical sector in Oxford, technology in Cambridge, distribution in Northampton, and from key workers around hospitals across the country.

Ultimately, national house price trends are not so important if you’re able to benefit from micro area changes.

For long or short-term investors, it would be a mistake to rely solely on house price growth, since this is a force beyond the control of any single investor. However, for many investors, it is a big part of the attraction to property, so you need to understand the trends, and what will drive growth in the housing market.

It’s worth pointing out: if you’re looking to capitalise on house price growth, the best investment areas might not be the sexiest. When an area is described as a ‘hotspot’, it’s probably too late.

Growing rental demand

Rental demand is increasing relative to supply. New housing supply is limited by our planning system, limited land available, and construction time lags and costs. In addition, many landlords are selling properties in response to the growing regulatory and tax burden of traditional buy-to-let investments. At the same time, rental demand is growing due to:

  • Rising living standards

  • A relatively robust economy

  • Demographic and social changes such as: an ageing population, with people living alone for longer; and millennials settling later/not at all

  • 'Generation Rent's' affordability constraints and desire for flexibility

  • Uncertainty and higher unemployment in the post-Covid years.

The last of these is unfortunate but undeniable. Uncertainty and unemployment mean fewer people will be willing and able to buy their own home. This trend has already begun: there were significantly fewer housing transactions in 2020 than in previous years, and existing property owners outstripped first-time buyers.

The good news for long-term investors is that this will mean higher demand for rental property. Providing rental housing that people can afford is like providing a utility: it is countercyclical since we all need a roof over our heads, regardless of the jobs market.

As a result, rents are expected to increase. Savills suggest this will be 3% annually over the next five years. Rents tend to grow by less than house prices. This is partly because you can multiply your buying power when acquiring properties, but can’t leverage rent.

As a result, rents are also more stable than house prices. For example, growth generally slowed but continued through the global financial crisis, Brexit and Covid.

For investors, the stable value and income associated with owning rental properties is increasingly attractive, in particular in the context of low yields and volatility available elsewhere. For example, in 2020, one of the most popular choices for saving, NS&I’s direct saver account, cut its rate to 0.15%. In the same year, the FTSE 100, which is seen by many as a relatively stable stock market investment, dropped by 35% in one month, then grew by 35% in three months.

While property is often seen as a ‘safe’ investment, it still makes sense to minimise risk. If you’re planning on establishing or growing a rental portfolio in the 2020s, you can reduce risk by focusing on relatively affordable housing, in places people want and need to live.

For example, less ‘vanilla’ strategies like Houses in Multiple Occupancy (HMOs) and holiday lets are often positioned as being the holy grail in terms of rental yields. However, rental demand fluctuates more, the regulatory risk is higher, and net returns and sustainability of those returns often mean they are not really worth the hassle.

In addition, you can reduce risk by making the right location decisions. There’s already excess supply of premium rental housing in cities such as London, Manchester and Liverpool. The trouble is, many wealthy, transient target tenants have left the city or even the country.

Other potential tenants are restricted by affordability constraints, or are choosing less urban rental properties. By contrast, housing for distribution workers near Amazon’s warehouses in Warrington or Doncaster, where suitable supply is limited and demand is growing, seems a promising - albeit less glamorous - option.

If you own prime properties, you may need to accept a short-term reduction in rents to minimise the risk and cost of void periods, and it is worth considering more mainstream, locally affordable housing going forward.

What investors offer is important, too. For example, Covid has catalysed the homeworking trend. According to Computer Weekly, it has accelerated UK digital transformation by over five years. Many companies are now planning to have staff in the office 1-2 days a week or, in the case of companies like Twitter, not at all.

As a consequence, in 2020, people cared less about being in cities like London. A ‘two track rental market’ emerged, with non-London UK rents increasing by 1.7% annually, verus a fall of 5.2% in London according to Zoopla.

Zoopla research also highlights growth in searches being for gardens, parking, garages, balconies and pets as a direct result of the escalation in homeworking. People want more indoor and outdoor space, and of course, great WiFi.

Invest in properties and locations that allow you to deliver what people want, or adapt your policies - e.g. accepting pets. Why? As The Oxford Martin Institute puts it: ‘A combination of choice and technological progress means we are unlikely to go back to norms this year or decade.’


In many ways, there’s never been a better time to invest in UK residential property, provided it’s done in the right ways. If you’re looking to grow your portfolio in the 2020s, look first at what is driving demand and supply.

Key market trends will affect house prices (values) and rents (returns) through the 2020s. The housing market is in fact many different local markets. Trends affecting these will be the key to what works and what doesn’t for property investors over the coming decade.

*Anna Clare Harper is chief executive of asset manager SPI Capital


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