British Residential Property Is a Strong Prospect For 2018

2018-04-16


As an asset for investment, residential property has always been seen as a strong option in Britain[1]. There have been fluctuations along the journey, such as the crash in property prices in the early 90s[2], but otherwise it has offered excellent long-term returns.


However, more recently the reputation of British residential property has taken a hit, due to the economic uncertainty surrounding Brexit, stamp duty and a slowdown in price growth[3]. No one can truly predict the effects of Brexit - this current state could be a temporary correction or a sign of what is to come. House prices[4] as well as foreign investment[5] were at record highs before Brexit. The outcome of the EU referendum surprised many[6], causing economic uncertainty and concerns over whether the growth in price is sustainable.


Nevertheless, some of these concerns have proven to be unnecessary. House prices increased by 5% in 2017[7], much to the discontent of first-time buyers. This indicates that the demand for more residential units outweighs any other factors and in turn providing a return on investment. This is not particularly shocking, with Sajid Javid, communities' secretary, reporting that we need to build 300,000 homes a year to tackle this much-discussed topic[8]


The results of the referendum on 23 June 2016 have opened up new avenues for investment. Up against the Euro, Dollar and other currencies, the British pound has devaluated, dropping up to 21% against other major currencies. This makes UK assets better value than it has been for quite some time[9]. This is particularly good news for foreign investors, providing better value for money, and continuing the flow of capital into UK property. In turn, developers can find financing for development projects and increase the amount of homes in the UK.


The property market is still attracting attention, especially in areas such as Manchester, Liverpool and Leeds. According to Money Observer[10], Birmingham is the one to watch, with a fast-growing economy, low prices and high yields. Lawmakers' attention post-Brexit is seemingly more focused on helping first time buyers and increasing the rate of homebuilding.


Overall, there are still opportunities for investors to diversify their portfolio with UK property. There are risks facing the economy which could impact upon residential property, but many of the fears surrounding Brexit have been dismissed. The high demand and lack of supply of homes will support a baseline of house prices and the increasing UK population means the trend is still strong.


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Sources:

  1. Share Property
  2. Property Investment Project / House Price Crash From The Early 90’s
  3. The Independent / UK housing market slump continues due to Brexit uncertainty and stamp duty increases
  4. The Independent / House prices hit record high after rising at fastest pace in eight months
  5. Reuters / UK landed record foreign investment in year of Brexit vote
  6. The Standard / EU referendum result shocks world leaders as Britain backs Brexit
  7. The Guardian / House prices rise 5% a year in more bad news for would-be buyers
  8. The Guardian / Housing crisis: we will borrow to invest in new homes, says Sajid Javid
  9. City Am / Pound devaluation: how the lessons of 1967 apply today
  10. Money Observer / Why British residential property remains a good bet in 2018

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