UK property has long been an attractive option for international buyers, largely because of the reliability and scale of the potential investment returns on offer.
While it’s true that the country itself is going through a period of political and economic uncertainty – largely because of Brexit – there are still some very powerful reasons for overseas investors to secure a stake in UK property.
1. The rise of northern cities
London – traditionally the engine of the UK property market – has been experiencing something of a slump where house prices are concerned, while cities in the north of England have been surging forward.
According to the latest UK Cities House Price Index from Hometrack, both Liverpool and Manchester witnessed year-on-year price growth of more than six per cent in July 2018.
London, in contrast, saw its rate of annual price growth slip into negative figures.
Furthermore, the capital’s current average property price (£483,800) is more than three times higher than Liverpool’s (£117,800). This illustrates how much international buyers have to gain from entering a market that offers the dual incentives of low entry prices and strong prospects for capital growth.
2. Favourable exchange rates
The value of international currencies against UK sterling will always be a key consideration for overseas buyers who want to get maximum value for their money.
Since the EU membership referendum in June 2016, Britain’s currency has been on a fairly steady downward trend against other major international currencies.
The pound’s value against the euro has dropped from €1.27 on June 18th 2016 – just before the referendum – to €1.12 in mid-September 2018. Against the US dollar, sterling has decreased from $1.44 to $1.31 over the same period.
With the pound in a fairly weak position, foreign investors can take advantage of the value of international currencies by purchasing in the UK now.
Faisal Durrani, head of research at Cluttons, recently noted that buyers from the Middle East have been showing interest in buying property in the UK before sterling begins to recover its value.
3. Demand for rental property
Investors entering the buy-to-let market will be looking for assurances of local demand for private rental property, to maximise the likelihood of consistent and healthy yields.
One of the defining trends in the UK market at the moment is housing undersupply, which means demand for available property is generally high, especially in big cities and surrounding commuter belts.
This is particularly true in the private rental market, in light of the affordability constraints and other challenges that make it difficult for many people to buy their own home.
According to the Association of Residential Letting Agents, demand from prospective tenants increased in July 2018 to its highest level since September of the previous year.
Meanwhile, the supply of rental properties declined, fuelling competition between tenants and pushing up average rents.
4. A wide range of assets
The UK property market is consistently growing in diversity, giving buyers an increasingly broad range of asset classes and investment options to choose from.
In addition to regular residential property, international investors can consider options such as purpose-built student accommodation. This can be a lucrative route to take, particularly in locations such as Liverpool, where the student population is growing at a rapid rate and demand for rooms near university and college campuses is high.
Another alternative to purchasing existing property is buying off-plan. Securing a stake in a development that is still in progress can bring a number of benefits, such as early investor discounts to maximise growth potential.
Buyers who commit early to projects in high-demand areas can look forward to strong rental yields when the property opens.
5. Long-term reliability
The UK has established a strong track record as a safe destination for property investment, giving buyers a high likelihood of securing healthy returns on their initial outlay.
According to Halifax data, the only time in the past 30 years that the UK housing market has experienced a sustained downturn in prices was in 2008-09 – in the midst of the worst financial crisis since the Great Depression of the 1930s.
Property values began to recover in the second half of 2009 and have been generally trending upward ever since, with growth really starting to accelerate in 2013.
Research has suggested this positive trend is likely to continue, with property consultancy Strutt & Parker predicting a cumulative increase of 18 per cent in house prices over the next five years.
Brexit and other unknown or unforeseeable events could well have an impact on the UK housing market and the economy as a whole in the future, but property remains one of the safest bets for international investors interested in Britain.
If you are an overseas property investor looking to enter the UK’s real estate market, contact Experience Invest today for more information.