Why Invest in UK Property in 2022?

A key decision for many investors asking ‘why invest in UK property’ is the positive property market forecasts we’re seeing in 2022.

After a year of social distancing guidelines and national lockdowns, UK property has thrived, breaking record price levels to reach an all-time high.

The pent-up demand the market saw last year has led to experts predicting that UK property prices could rise by 4.5% in 2022, which would see an already record high price of £270,708 continue to increase.

They also predict that the momentum of the last 18 months could sustain further price growth for the next four years, where UK property price growth could reach 24.5%. 

Source: JLL

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 West Midlands. As an affordable region, it further highlights 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.

Aside from property prices, another key contributor to why investors are looking to invest in UK property is the rental market forecasts.

As renting became more affordable than buying for the first time in five years towards the end of 2021, we saw more tenants enter the rental market than ever before – to a point where supply can’t meet demand.

Research by Hamptons has suggested that while buying property has long been more affordable than renting on a monthly basis, the pandemic has left renting marginally more affordable. Specifically, those with a 10% deposit would be £102 worse off each month when purchasing a property than if they were renting. 

This has contributed to rents hitting their highest level in 13 years, with the average rental price increasing to over £1,000. The East Midlands saw the highest increase over the last year, with rents rising by 8%.

Now, UK rental yield forecasts suggest that rental prices could rise by 12% across the country as demand continues to grow.

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. 

Despite the Stamp Duty holiday having drawn to a close in October 2021, buyer confidence has stayed consistent over the past six months, which is expected to continue into next year. 

In August 2021, reports found that 75% of active buyers were confident about purchasing a property by the end of the year, while 81% of UK sellers were positive about selling their property within three months. 

The unwavering demand in the UK market has been a significant driver behind buyer confidence, as well as the current lending environment. Interest rates are at an all-time low, and with the Bank of England confirming a 0.1% interest rate for the coming months, the wide availability of low-rate mortgages has been another incentive for both homebuyers and investors.

For those still wondering, ‘why invest in UK property?’ The growing disparity between supply and demand is one of many reasons. 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.

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.

In recent years, the UK has received an increasing amount of Foreign Direct Investment (FDI). Reaching as high as £1.5 trillion in 2018, inward FDI projects have repeatedly increased by 5% in the past three years.

As the UK continues to be one of the largest receivers of inward investment in the entire continent, it’s no surprise that more projects are emerging across the country. The digital tech industry has benefited the most from this inward investment, with an additional 432 projects in 2019 alone. 

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.