As we approach the end of 2016 and look towards 2017 there are in fact many reasons to consider investing in the UK property market. It may not be a calm ride during the next 12 months, there will be ups and downs, but there are positive factors to take into consideration. Quite what the long-term impact will be from Brexit remains to be seen but it is certainly not all doom and gloom.
Relative rental yields for UK property
While UK inflation currently stands at around 1.2% the real yield on rental properties is very attractive when compared to base rates. There are many areas of the UK where double-digit rental yields are available, although limited long-term capital appreciation, while prominent cities such as Glasgow, offering 7.2%, and Dundee, offering 5.9%, look very interesting. So, while many people believe you need to venture away from the major cities and towns of the UK to lock in the best rental yields, this is not necessarily so.
It is also worth noting that while UK base rates will not remain at this level for ever they are unlikely to increase significantly in the short to medium term. We may see a slight increase in inflation, which would reduce the real rental yield, but compared to savings rates there is no comparison.
So far the UK employment market has held up fairly well when you bear in mind the confusion regarding the U.K.’s forthcoming exit from the European Union. Rather bizarrely, if property prices did fall significantly then buyers would return to the market but if property prices remain steady or move ahead, then there will be increased demand for rental accommodation. The simple fact is that there will be a gradual increase in long-term demand for owner occupied and rental properties right across the UK. On this basis, do you really see the UK property market collapsing?
Various schemes such as the Help to Buy program have been pivotal for many people looking to climb onto the property ladder for the first time. The simple fact is that governments of the day need to manipulate the property market to keep voters on side. As a consequence, we can expect to see an array of similar financial support offered to first-time buyers if markets do begin to struggle.
Growing demand, government support and attractive real rental yields will play a major role in the short, medium and long-term direction of the UK property market. This is before we even begin to consider foreign investors many of whom have seen a circa 20% improvement in their purchasing power because of currency exchange rate movements after the vote to leave the European Union. So, while we may see some short-term economic consolidation is there really any need to be concerned about the UK property market in 2017?