Property investment in the UK: Long-term gains in a stable market
The UK property market is in an interesting place as we enter the final quarter of 2023. If you look at surface-level reports of asking prices being cut, mortgage rates rising and an overall lack of available properties in the market it would be easy to conclude that this is a bad time to buy.
However, that doesn’t tell the whole story when it comes to investing in property. Investment always comes with a level of risk, but the best way to mitigate that and make a success of your portfolio is to look at it with a long-term view. While there are short-term gains to be made in some circumstances, investing with a view to securing profits over time reveals the market to be one where long-term stability and benefits can be found.
For example, house price fluctuations are dominating the news cycle. Reports from Nationwide last month show that the average house price fell by 5.3% over the last year. However, it must be taken into account that this fall was from a record high seen in August 2022 and they have only fallen to the level seen in December 2021. They are still 20% higher than the five-year average overall.
Now, the latest UK house price index from the UK government – released in September 2023 – shows that house prices have increased by 0.5% since June and 0.6% annually. This is in spite of reports from Rightmove which say the proportion of UK sellers cutting their asking price has reached its highest level for a decade.
When looked at from this perspective, it becomes clear that short-term anomalies cannot be used to define the market. Instead, long-term trends show that the market is not just stable over a longer period of time, but we can also see that it is profitable. From this viewpoint it is easy to see why investing in UK property is a good and reliable long-term prospect.
Looking ahead at future market projections makes this even clearer still. The five-year prediction for UK mainstream house prices shows that we can expect five-year growth of 6.2% by the end of 2027. That includes a budget in their calculations for an overall house price drop of 10% this year – a much greater decline than we have seen so far. This means that the five-year growth projection offered by Savills may end up being conservative.
When we dig into regional data, the trend towards long-term gains becomes even more pronounced. While Savills believes that the current affordability issues will have some effect on the major regional markets in 2024, by 2027 the picture looks a lot brighter.
Furthermore, the regional property market is likely to outshine the national market by some distance in many places. Compared to the expectation that average house prices across the country will grow by just over 6% over the five-year period as mentioned previously, the North West (11.7%) and the West Midlands (8.9%) are set to grow much faster and therefore represent an even more impressive opportunity for property investors looking at long-term gains and stability.
Those regions are anchored by their major cities – Manchester and Birmingham respectively – which have proven to be resistant to larger economic uncertainty thanks to their foundations. Both cities have a real lack of supply, especially in the most desirable luxury city centre areas, and do not have anywhere near enough properties in the pipeline to meet it.
This makes it the ideal time for investors to look at properties in these cities to make the most of the upcoming growth. In particular, luxury buildings in the city centre and with great transport links are more popular than ever, and will only become more so in the future - creating an opportunity for investors to profit.
You can read more about what makes these cities such outstanding investment prospects along with other places in our top 5 UK property destinations by clicking here.
With rents also rising to UK record highs, now is a good time to consider your next investment and make the most of the long-term gains and stability on offer with UK property. Learn more about our available opportunities and get in touch with the team today by clicking here >>