UK property has shown itself to be one of the most resilient and dependable asset classes in recent years.
Steady capital growth has seen the average UK property price almost triple from £84,620 at the start of this century to £235,298 in November 2019, according to the Land Registry.
The uncertainty caused by Brexit and other external factors has led to the market being more subdued than usual over the past year or so, with many people taking a ‘wait and see’ approach before making any big commitments.
As the country looks ahead to 2020 and beyond, however, there is every reason for investors to feel confident that UK property will be as resilient and profitable as ever.
Demand for living space
One of the clearest reasons why UK real estate is such a reliable asset class is the simple fact that demand for housing exceeds supply.
The UK population continues to grow, driven by long-term international migration and the fact that people are living longer. The upshot of this is ever-increasing demand for living space, and housing supply is struggling to keep up.
Surplus demand means higher prices and capital growth for property owners, as well as greater scope for landlords to increase rents, particularly in key locations like commuter towns.
Furthermore, buy-to-let property owners face a much lower risk of void periods owing to growth in the number of people looking for rented accommodation, often because would-be buyers are struggling with affordability or can’t find a suitable property for sale.
Rental returns depend on a healthy flow of tenant demand, so it’s good news for property owners and landlords that the need for high-quality living space on the private rented market is stronger than ever.
According to property listing site Zoopla, rental demand increased by 8% in 2019 and new supply fell by 4%, contributing to a 2.6% annual increase in average monthly rents.
The difficulty so many people face in buying a home in the UK has given rise to the concept of ‘generation rent‘ – an entire cohort of the population who are looking for high-quality, long-term rental property as an alternative to purchasing.
The movement has also seen the co-living concept rise in popularity for both renters and investors who are approaching the UK’s property market with a fresh approach.
This powerful source of demand is further evidence of the fundamental strength and resilience of the UK housing market for investors.
Diversity and choice
Another key characteristic of British property that helps to explain why it’s such a reliable and attractive investment is its diversity.
From mainstream residential housing to up-and-coming, alternative asset classes, there are always new opportunities and profitable prospects available to investors in the UK.
A perfect example of the potential on offer in emerging sectors is purpose-built student accommodation, which has evolved from a niche investment into a key part of the UK property market. Investors who made an early commitment to student housing have enjoyed lucrative growth and higher-than-average yields in recent years.
With segments like this continuing to develop and generate returns for investors, UK property as a whole looks set to be as robust and reliable as ever in the years to come.
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