10 Reasons why you should invest in the UK property market

With most reporting an upward curve in UK property prices and with the Office of National Statistic’s reporting that the Government had hit their 2.0% inflation target at the end of Q4 2013 as well as the number of people out of work falling to 7.1%, the stage is set for an economy on the rise.

With this in mind the UK property market is in good shape with trends in 2014 looking to follow the rises enjoyed in 2013. To put this into perspective UK Land Registry has stated that the average house price in England and Wales rose to £167,353 which represents an annual growth of 4.4% in December 2013 with the market strengthening across all regions.

UK-Property- Market

With cheap money available through Bank lending with The Bank of England’s desire to maintain interest rates at the low level of 0.5%, let’s look at 10 reasons which will explain why now is the perfect time to consider investing in the rising UK property market.

 Property prices in the UK are continuing to rise meaning capital growth potential

UK property prices continued to increase in the three months to January 31st, according to the latest report from one of UK’s leading property lender Halifax.

Halifax’s House Price Index for January 2014, data shows that property values were 1.9 per cent higher than in the preceding three months (August 2013 to October 2013).

According to the data, prices in the three months to January were 7.3 per cent higher than in the same three months a year earlier, while on a monthly basis values increased by 1.1 per cent in January, following a small fall of 0.5 per cent in December.

Housing market activity is broadly on an upward trend, with transactions in 2013 exceeding one million for the first time since 2007 and home sales rising for the ninth successive month to reach 103,040, which represents a 30 per cent increase on December 2012.

Many experts are predicting that house prices will continue to rise throughout 2014 with the lack of supply and a high demand for homes due to increasing consumer confidence and current access to low rate mortgages are just some of the reasons cited for this growth.

The Halifax said it expects house prices to continue to rise during 2014 at a similar pace – between 4% and 8%, with all regions expecting growth.

Mortgage lending has improved which is helping to drive the property market forward

The number of mortgage approvals for house purchases was nine per cent higher in the three months to December than in the previous quarter, and 30 per cent higher than in the same three months of 2012.

The rise in mortgage lending is a good indicator of confidence in the property market and stability in the economic factors underpinning the UK’s internal economic growth.

It is important to note that the demand for properties is driven as much from the local population as much as it is from foreign investors which combined is leading to rising prices which should be sustainable in the long term.  

Government incentives

Funding for Lending Scheme

The Bank of England and HM Treasury launched the Funding for Lending Scheme (FLS) on 13 July 2012. The scheme was designed to provide incentives to banks and building societies to boost their lending.

A lot of this funding was allocated to residential mortgages which drove mortgage rates down and helped boost the housing market.

This is now being wound down. In November 2013, the Treasury and Bank of England announced the Funding for Lending scheme will stop propping up new cheap mortgage funding from next year, but banks and building societies can still borrow from their existing allocated funds so this would suggest that now would be a good time to take advantage of the low mortgage rates while additional funds are still available.

Help to Buy scheme

The government’s Help to Buy scheme has been set up to help people acquire a mortgage without a large deposit.  Consumers can access mortgages with a low deposit of 5% either through an equity loan or mortgage guarantee scheme.

There is a lot of information online about the Help to Buy scheme, so I won’t go into detail here, but I would just like to point out that this scheme has helped drive the property market due to more people being able to acquire mortgages, therefore there are more buyers on the market.

This in turn is encouraging people, especially first-time buyers, to get onto the property ladder which is helping keep momentum with the house price recovery. Some would argue that this could create a bubble but at the moment things seems to be heading in the right direction. 

Consumer confidence

With prices increasing and people encouraged to buy property with low mortgage interest rates and the government’s Help to Buy scheme, consumer confidence is returning to the UK housing market. As a result property prices are gradually being driven up and many experts have predicted the trend is set to continue for the foreseeable future, and certainly way into 2015. Rising prices point to strong capital growth potential, making now a good time to invest in UK property. 

Rental yields are strong and rising

With rents rising steadily and with demand for rental properties at an all-time high as a consequence of tenants renting for longer periods of time, landlords now benefit from strong rental yields from their property investment.

The resurgence of interest in buy-to-let properties  are a direct consequence of the difficulties faced by first-time buyers and the attractiveness of achievable returns to landlords taking a medium to long term view on their investment.

In a 2013 survey by RICS members, the consensus was that rents across the UK were likely to increase by 3.9% over the next year.

Coinciding with this information, the latest LSL landlord sentiment survey has revealed a third believe rents will rise over one per cent during the coming months, with an average increase of 3.7 per cent predicted.

More recently property experts Move with Us have revealed that the cost of average advertised monthly rates has increased again; there was a 0.77 per cent rise in UK rental prices in Jan 2014

When comparing the latest figures to the previous year, the overall rental market has increased by 1.63 per cent, meaning the average advertised rent in the country now stands at £987, with expectations this will surpass £1,000 sometime during 2014.

 UK commercial property is performing well

Returns from commercial property in the UK have reached 2010 highs according to IPD.

Growing investor confidence in the real estate markets outside of London due to positive improvements in the UK economy has helped boost returns to reach figures recorded 4 years ago.

IPD – a leading provider of property performance and risk analysis – has stated that commercial property outside of London equals 63.3% of the UK’s £11.6 billion commercial market. Excluding London, capital values in the UK increased slightly below the national average rate of 2.2% during Q4 2013.

Strong demand also fuelled by overseas investors

According to reports, overseas investors who purchase property in the UK – especially those who buy property in London – are helping to fuel the market.

Think tank Civitas has stated that wealthy investors purchasing homes are driving up prices.

Improvements in mortgage lending and government schemes have also helped push prices up, with more first-time buyers now purchasing properties across the UK.

Despite the rising number of buyers, demand in most cities is unable to keep up, making now a good time to buy if the investment is right for you. 

Range of non-traditional UK property buy-to-let assets available

It’s not just traditional property assets that are performing well. Student accommodation, care home rooms and less traditional options like car park spaces and self-storage units are performing well.

As outlined above, the UK property market is witnessing a revival with rising prices and increasing rental returns. Whilst the more traditional investments are experiencing a rise in prices and yields so too are the assets classed as Income Generating Assets.

Most investors know more about the mainstream, every day investments like residential buy-to-let or commercial property such as offices and hotel investments, however not every asset class is as widely known.

Student Property Investment

Named the UK’s number one performing asset class by Knight Frank, student property investment has outperformed all other asset classes since 2011. Rising student numbers coupled with high occupancy rates has created a strong demand, therefore good returns, in some of the country’s top university towns and cities. Knight Frank forecast that returns will continue to rise throughout 2014.

Care Home Investment

Due to the non-discretionary nature of the care homes, investment in the sector has remained strong. A rising ageing UK population coupled with a lack of high-quality rooms has helped propel Care Home Investment into the mainstream, with many investors receiving strong returns due to strong occupancy levels.

Alternative Investments

Lower entry level commercial property investments such as Self-Storage and Car Park Spaces have proven popular with those looking to diversify their portfolio. Both sectors have a rising demand in the UK and when located in an area of high demand, will provide investors with a regular and passive income. Typically these kinds of investments offer a lower entry level into the UK’s property market, making them an appealing option for those with a smaller budget. 

Stable and clear property ownership laws

Known for its transparent nature and flexibility, the property market in England and Wales offers a broad variety of investment options.

It is appealing for overseas purchasers due to attractively priced assets and the current lack of restrictions on foreign nationals or overseas companies buying or renting property (subject only to tax implications).

Clear, established and transparent property ownership laws help to negate uncertainty in the UK’s market, making it appealing to those based overseas. Uniquely the market is known as a trusted and well-established market, making it a good location for property investors. 

Prestige of owning a property in the UK

With a large royal heritage, beautiful countryside and scenery, a colourful historical past and a growing economy, the UK is considered one of the world’s most popular tourist destinations.

And it’s not just tourist who are willing to spend their money in the UK.

The UK has a lot to offer the world. London is known as a hub of international business and 6 of the world’s top 20 universities situated across the country, making it an appealing location for students wanting to learn and businesses to thrive.

It’s no wonder why the UK is considered as a prestigious location to own a property.

From residential buy-to-let to student accommodation, from commercial offices to alternative investments, owning a property in the UK is a coveted achievement in some countries.

This article was written by Luke Fitzsimmons on behalf of Experience Invest, a specialist UK property investment company based in central London. You can browse the website at: http://www.experienceinvest.com


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