If you’re looking to expand your investment portfolio, UK real estate is an asset class seriously worth considering. Here’s 5 reasons why now is a good time to invest.
- The demand for rental properties is growing. Long-term trends show the proportion of people in the UK who own their own home falling, while the number of households renting has more than doubled since 2001 and risen by 1.3 million in the last decade alone.
- Rental costs are increasing in key locations, with Zoopla figures showing an average 11% increase last year – rising to 15% in London and 14% in Manchester. In April, average rents reached a new high of £1,249 per month, equating to an extra £1,500 of rental income per year.
- Pick the right location and you can achieve strong capital growth. In Manchester for example, average property prices in Manchester increased by 14% in the year to December 2022, on top of an increase of 34% over the preceding two years. In Birmingham, Savills have forecast that house prices will increase by 24% by 2025, with Halifax data finding that house prices in the city grew by 13.8% – or £32,563 in cash terms – last year.
- The UK offers benefits for investors that can’t readily be enjoyed in many other countries. Interest-only mortgages are hard to come by across Europe, but in the UK they enable investors to benefit from low monthly payments, which can comfortably be covered by rental income, with strong returns on capital growth as the property value increases.
- When buying off plan, investors in the UK market also benefit from paying the price on reservation, not on completion as is the case in other countries. With property prices booming in redevelopment zones and growth areas, locking in a price when reserving a unit can help to maximise your return on investment.
It is because of these fundamentals that UK real estate is and will remain one of the most stable, secure and popular markets for domestic and global investors alike. With inflation and energy prices set to fall this year and the Bank of England now forecasting growth in place of a recession, now is the perfect time to invest.
Lenders will have far more room for manoeuvre to be competitive on mortgage rates. This is already starting to happen, with HSBC offering a five-year fixed mortgage at below 4%, mortgage approvals now on the rise again and the return of the 100% mortgage for first-time buyers.
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