While the UK property market may be under pressure at the moment, with concerns about Brexit, there are long-term opportunities out there. It would be foolish to suggest that Brexit should be ignored. However, it would also be foolish to suggest that Brexit is the be all and end all when it comes to property investment in the UK.
Long-term property investors are cherry picking undervalued properties with secure cash flow and good long-term potential for capital growth. It can be difficult to ignore the short term concerns highlighted by the UK media but successful investors are able to see the wood for the trees.
Whether or not the UK retains full control of immigration there is no doubt that the UK population will continue to grow. This will lead to even greater demand on housing and long-term upward pressure on property prices. When looking at any investment market one of the main things to consider is long-term growth drivers.
New build properties
Those who follow the UK property market will be well aware that governments over the years have promised to increase the number of new build homes. They have rolled out investment figures in the billions, promised assistance and tax breaks. While there has been a partial delivery on this front, the UK is still literally tens of thousands of new build properties a year behind the demand curve (and that is being generous to the government!). A growing population, and a lack of new build properties, creates competition amongst buyers, pushing prices higher.
Buy to let market
The UK buy to let market is one of the most lucrative investment sectors of recent times. In what became something of a self-fulfilling prophecy, first-time buyers priced out of the market were forced into the private rental sector. This in turn increased investment by landlords, pushing prices higher and higher, creating a vicious circle. It was therefore no surprise to see the UK government reduce tax breaks for private buy to let investors. While this may have a short-term impact on the buy to let market, long-term growth drivers still remain.
A number of long-term property investors see the recent reduction in UK economic growth as a potential long-term buying opportunity. Let’s not forget, the UK is still one of the largest economies in the world. In a worst-case scenario, the UK would revert to World Trade Organisation (WTO) terms in light of a no-deal Brexit. However, this would not prevent a long-term trade deal with Europe further down the line.
UK unemployment has now fallen to 4% which is the lowest level since the 1970s. Granted, there is work to be done with regards to Brexit and realigning the UK economy post Brexit, the UK employment market is robust at the moment. Any improvement in household income will at some point feed into the UK property market whether through owner occupied property investment or private rental.
Prospects for the UK property market
When you consider the doom and gloom currently surrounding the UK property market, would you be surprised to learn that property prices as a whole are still increasing year on year? London and south-east house prices have felt the brunt of the house price pressure but these areas benefited most in the boom times. In some of the less fashionable regional property markets, double-digit rental yields have been available in years gone although with limited potential for capital growth. The situation is changing with many London investors switching to other areas of the UK where there is perceived “better value for money”.
As long as the UK population continues to grow, and new build numbers fail to meet demand, the buy to let sector will remain buoyant. Cash flow is king in the buy to let sector, allowing investors to finance their debt and expand their property portfolios. There may be more difficulties in the UK in the short term, with Brexit taking centre stage, but in the longer term there are many reasons to be positive on UK property.