WHAT IS THE CURRENT UK PROPERTY MARKET AND FUTURE CLIMATE?
With the Buy-to-Let in the UK worth over £1 trillion, research estimates that UK renters will outnumber homeowners by 2039. Property investment in the UK offers a clear opportunity to build long-term returns. Magna Partners looks at the current investment market climate and UK property forecasts.
Despite soaring inflation, interest rate rises, and the cost of living crisis, 2022 was a strong year for the UK property market. By last October, UK house prices rose by 12.6% according to the latest data from the ONS. Prices today are well above their pre-pandemic levels – from £232,919 to £257,122 in March 2023, where the average property dropped 3.1%. That is compared to with the 1.1% annual decline in February, according to the Nationwide Building Society’s house price index. So what is happening with house prices when some analysts have warned there could be a fall of nearly 10% this year? Experts at Nationwide are wearing the squeeze on household budgets will make it harder to regain momentum.
Current Property Market Climate For Property Investors
For years the UK property market was overheated, with house prices seeing annual growth of more than 10% during the pandemic. But fluctuating mortgage rates and the cost of living crisis have slowed this significantly. With further rate rises expected in 2023, increasing mortgage payments may dampen the property market. Magna Partners considers the numbers and projections to help guide property investors through the current housing market. House prices have defied expectations by increasing 2.1% in the year to February 2023, according to Halifax. But between November and December 2022, according to Halifax, Nationwide, and Rightmove, average house prices fell 1.5%. Halifax Mortgages say the annual growth rate slowed in all nations and regions this February, although all regions saw a rise in annual house prices in 2022. Annual growth reduced most significantly in the North East at 1.1% vs an increase of 3.6% in January. Average house prices in London are now £526,842 – a 0.9% drop from last month.
UK Property Market Facts and Figures
The latest Bank of England Figures shows the number of mortgages approved to finance house purchases decreased in January 2023 by 2.2% to 39,637. Property website Zoopla said that demand for housing has fallen between 20% – 50% during the year to February, with sellers discounting asking prices by an average of 4.5% or £14k to reach a sale. So is the housing market experiencing a downward curve or settling into a traditionally busy spring market? House prices appear to have stabilised following significant downward trends, and experts say there’s been considerable uptake in activity in 2023. The general thinking is the property market will move forward at a measure paced over the year ahead and stand firm.
House Price Variations Across the UK
Figures from ONS show a slightly different trend, with the most semi-detached and terraced houses rising in price. In the year to October 2022, the average
cost of detached houses reached £486,376, up 12% over the year; semi-detached houses prices hit £287,383, a 14% increase; terraced houses hit £242,690, a 14% rise and flats reached £235,237 an increase of 8.6%. Estate agents report significant interest in rural and remote areas as the lockdown highlighted a surge of interest in the countryside and the coastal regions. With demand still outstripping the supply of homes in many locations across the UK, buyers are returning to the market. Up-and-coming areas can help property investors achieve greater returns. The continuing appeal of property as an asset is down to supply and demand – with demand set to continue in 2023 and beyond.
Housing Market Rental Supply and Demand
Magna Partners can say that while house prices look to remain stable in 2023, across the UK, the average rent price increased by 10.8% in 2022. Overseas investors capitalised on last year’s plummeting pound to grab property bargains. But today, UK property investors have many investment opportunities as the property market leads by strong rental growth and a pronounced surplus of demand over supply. This year presents a chance for investors to secure properties more cheaply. According to Savills, UK property is expected to rise in price over the next five years by 21.5%. The average rental for UK property investment could rise by 2% over the year, contributing to an 8.5% increase over the next five years.
Property Investment Opportunites 2023 and beyond
Even in a market downturn, individual properties or developments can significantly outperform national averages. Certain towns and cities fare better than others – less expensive locations have shown a robust capital growth rate and excellent yields. Numerous cities and towns across the UK are doing well, particularly Wales, parts of the Midlands and northern England. Other areas outside big urban city centres, such as Birmingham and Manchester, benefit from proximity to properties that are more affordable than the cities themselves. The latest data from the ONS, shows private rental prices have increased at their most remarkable annual rate for more than five years as demand heavily outweighs supply. According to Property Reporter, property investment remains a viable option for 2023 with a strong record of long-term capital growth and the reliability of rental demand. Now is an excellent time to buy with guaranteed demand and higher yields – it’s an attractive option for those looking to protect the real value of savings against the erosive effects of inflation while earning income from regular monthly returns.
