![Are rent controls now inevitable in the UK?](https://www.propertyforum.com/wp-content/uploads/2015/04/new-build-houses.jpg)
The Office for National Statistics (ONS) has recently released a raft of information regarding changes in the UK property market in recent times. We will cover some of the information in forthcoming articles but there is a very interesting report on the state of the UK rental market and a comparison between London/South of England and the North-East/Midlands. Even though the relative value of properties in the North and the South of England has been discussed in great detail, we do seem to be approaching something of a ceiling for prices in areas such as London and the South-East.
Rent as a percentage of salary
It turns out that pockets within the Midlands and the vast majority of the North-East of England are currently experiencing thirty-year lows when looking at rents as a percentage of salary. This would indicate that while wage inflation is not necessarily strong in the Midlands and the North of England it does seem to be outstripping the rise in rental costs. In direct comparison, if you look at London and some areas of the South of England you will see that rent as a percentage of salary is running at 30 year highs. So, while all of these areas make up part of the “UK property market” the perceived value and the affordability factor are miles apart.
Are we reaching a ceiling in property prices?
While we have seen this all before, experts suggesting there is greater value towards the Midlands and the North of England, some now believe property prices in London and some areas of the South of England are reaching an affordability ceiling. In theory this makes perfect sense but in practice this situation has been ongoing for many years now. The London market continues to move forward, the South of England separates further from the North and Midlands and despite cries of a “property price bubble” we have yet to see a major correction.
Time will tell if the situation is different this time around but there are some interesting factors to take in the consideration. The issue surrounding Brexit will not go away, some investors are now banking profits in the “more inflated” property markets and many are now looking for better value towards the Midlands and the North of England. However, there is a fly in the ointment!
Foreign investors
Foreign investors have played a major role in the UK property market from many years now with some areas of London dominated by overseas investors. This is not a secret nor is the fact that London is perhaps the prime property market of the world. Despite many domestic investors seeing London as overvalued, money continues to pour into the capital even during these uncertain economic times. The ongoing collapse of sterling against major currencies such as the dollar will also make UK property more affordable for many overseas investors with London and the South of England more likely to catch their attention than the Midlands and the North.
So, while in theory there seems to be a greater affordability factor in the Midlands and the North of England it is unlikely foreign investors will look outside of the South of England and London. After all it has to be said, these are the hubs of the UK economy and if the economy is doing well then these areas will likely perform better than their northern cousins.