Positive Property Forecasts
A key factor for many investors considering ‘why invest in UK property’ is the positive property market forecasts we’re seeing for 2024 and beyond. Although 2023 has seen a slight dip in house prices as the market corrects itself, it seems as if this downward trend in UK property prices is not set to last for long.
Savills believe that UK property prices could rise by 1% in 2024, meaning that property prices won’t remain low for long. So, if you have hopes of investing in UK property anytime soon, it is strongly recommended that you start exploring your options now before property prices increase once again.
However, certain regions of the UK are set to see better growth than others. JLL’s latest predictions have pinpointed six key regions for growth, as outlined below:
|East of England||-6%||2%||5%||4.5%||4.5%||9.9%|
This data alone is a clear indication of why buyers are looking to invest in the UK – regional cores are seeing high levels of growth, led by the Midlands and the East, as well as London. The Midlands is specifically attractive to investors as it is a more affordable region, thereby highlighting the potential of the location as an entry point for property investment.
While the South continues to be one of the most expensive regions in the country, it’s expected that London and the South East will rebound over the next four years after a challenging performance since 2016.
Long-Term Rental Growth
Aside from property prices, another key contributor to why investors are looking to invest in UK property is the rental market forecasts.
Over the past number of years, the imbalance between supply and demand in the rental sector has contributed to soaring rental prices. Rental increases have outpaced earnings for 21 months in a row, with rents increasing at a pace unseen since records began.
The average rental increase across the UK sits at 11.1%, although London saw far more significant price hikes of 15.2%.However, as we look to the future, it is not London that is expected to see the most impressive rental growth – that title goes to Manchester, Birmingham and Bristol. Predictions from JLL suggest that these key English cities will each experience rental growth of over 18% from 2023 to 2027 as these areas benefit from huge regeneration, job opportunities and rental demand.
With this in mind, UK property investments are becoming even more appealing – and with a growing demand for rental property, long-term forecasts are reflecting this.
Want to know more about the UK property market for 2024? Download the UK Investment Guide today and discover everything you need to know about UK property investment in the new year. In this guide you’ll find:
- Current market performance
- Forecasts for the UK property market in 2024
- Key trends impacting the market
- Best places to invest in 2024
The Perfect Storm Of Supply And Demand
For those still wondering, ‘why invest in UK property?’, the growing disparity between supply and demand is one of many reasons why investment remains appealing. Tenant demand is the key to a successful property investment, and with a growing population, property investment opportunities in the UK are becoming more lucrative.
The Private Rented Sector is the second largest tenure in the UK, with buy-to-let properties now totalling over £1 trillion. As an ever-expanding market, research has suggested that tenants will outnumber homeowners by 2039, highlighting the future of the UK property market.
While the UK as a whole has one of the largest populations in Europe, key cities across the country are housing the majority of these residents. Specifically, Birmingham is one of the most populous cities in the UK, and with forecasts expecting the local population to hit 1.24 million by 2030, the demand for property will continue to outpace the supply.
A Growing Population
Yet another factor that is sure to influence the disparity between supply and demand is the huge population growth expected across the UK in the years to come. As home to some of the most successful businesses in the world, as well as having access to the finest higher education institutions, the UK remains popular for those from overseas. In fact, the UK population is on track to reach 74 million by 2040, which will inevitably equate to more tenants in the rental market.
While ‘Generation Rent’ makes up the majority of the UK rental market, the number of over-50s renting property is increasing. Currently, there is a record-breaking 1.12 million over-50s in the rental market, and with a quarter of the UK population reaching 65 or older by 2050, there are now more incentives to invest in buy-to-let property.
Young professionals have always been – and always will be – the biggest demographic of tenants. However, as the older generation continues to downsize and turn to the rental market, the demand for these different property types is giving investors the confidence to diversify their portfolios.
Stunning Off-Plan Investment Opportunity
- Off-plan apartments – estimated completion 2023
- City-centre location just 3 minutes from Brindleyplace
- Unique waterfront living in Birmingham
- 24.5% price growth expected by 2026 (JLL)
- Top location for London leavers – forecasting yields above 5%
Increasing Inward Investment
In recent years, the UK has received an increasing amount of Foreign Direct Investment (FDI) with research from EY demonstrating that the UK ranks 2nd in Europe for the number of foreign investment projects.
The West Midlands is proving particularly lucrative for foreign investment, seeing the creation of 181 new FDI projects in 2022/3 compared to just 143 the year prior.
With this FDI signifying the potential of the UK, more global businesses are taking the opportunity to open additional offices across the country. While London has long been the obvious choice for companies, the growing popularity of additional cities has seen a surge in regional office spaces.
For example, Birmingham is in the midst of an ambitious regeneration scheme, and with the city growing in residents and amenities, its commercial hub is expanding. More recently, the likes of PwC, HSBC and Goldman and Sachs have announced Birmingham office spaces.
Frequently Asked Questions
Is buy-to-let a good investment?
If you were to measure how ‘good’ a buy-to-let investment is based on its past performance, this asset would probably come out on top. However, different assets will suit some more than others based on their financial goals.
If you’re looking for a resilient asset that can offer a passive income as well as the opportunity for capital growth, buy-to-let property could be the best asset for you.
With 8.9% price growth in the UK on the horizon, along with 15.9% increases in rents by 2027, forecasts suggest that buy-to-let property could be the route to financial freedom for many investors.
Is buy-to-let worth it?
When it comes to investing there’s generally no ‘one size fits all’ approach and buy-to-let property will suit some investors more than others.
However, for those who are looking for a long-term investment asset with a track record of competitive growth and more price increases on the horizon, buy-to-let is often the best option.
Buy-to-let is a flexible investment assets and can offer diversification across a wider portfolio. It’s historically one of the most stable assets and is much less exposed to external factors, plus it’s a physical asset, which makes it appealing with certain investors.
The answer to ‘is it worth it?’ depends entirely on how you use it. If you use it as a long-term asset, it’s proven to be a potentially lucrative investment vehicle that can be scaled effectively.
How to start investing in property?
For those that want to know how to start investing in property, the most successful investments often start with a clear financial plan.
By understanding your investment goals, you’ll be able to determine which asset is best for reaching your objectives and how it can be scaled.
More specifically, this could be an asset that offers higher short-term returns or a property built for a longer holding pattern.
Once you understand this, you can start deciding on locations, property sizes and tenant demographics you might want to target.
Finally, you’ll then be able to explore finance options and partners that you can work with.
Why invest in UK property?
UK property is recognised as one of the most appealing investment assets across the world. In comparison to other markets, the UK property market is not only resilient, but it can offer consistent short- and long-term returns.
While rental income can usually cover the monthly payments of the property and then some, this asset also grows over time. UK property prices have been on an upward trajectory for the best part of 10 years, with the average property price now 65% higher than it was 10 years ago.
Where to invest in buy-to-let in the UK?
Understanding where to invest in buy-to-let in the UK continues to be a tough decision for many investors, especially with so many potential locations in the country.
The best way to answer this question is to establish what you’re looking to achieve. Do you have short or long-term goals? Are you looking for capital growth or rental yields?
If you’re looking for more immediate rental returns, you’ll need a location with high yields and strong tenant demand.
On the other hand, if you’re investing for capital growth, you’ll want to identify areas that are regenerating and redeveloping the surroundings. This kind of activity often pushes property prices higher, which can deliver appreciation over time.
If you’re looking to find the best places to invest in the UK in 2022, why not check out our list here?
Will prices fall in the UK?
After the unexpected growth in property prices in the UK throughout 2020 and much of 2021, a sudden fall in prices was expected, especially with the end of the Stamp Duty holiday.
However, UK property price forecasts expect property prices will continue growing for the next two years, at least. Finishing 2021 on 5% price growth, followed by 4.5% increases in 2022 and 4.5% the following year, forecasts are not anticipating decreases in average property prices across the UK until 2026, at least.