Is the UK property market attractive to international investors?

By : Nick Marr

The UK, and especially London, has long been a prime destination for those wishing to invest in real estate. And although recent concerns over Britain’s departure from the EU might have been expected to dampen enthusiasm for UK property, in fact the overall trend is still extremely healthy for those looking for a safe investment with reliable growth.

Popular choice

In 2014 London was voted the number one city in the world for real estate investment by the Association of Foreign investors in Real Estate (AFIRE), while away from the capital foreign investment accounted for nearly one-third of all commercial property investment in regional areas of the UK during 2016. Large-scale retail and office developments such as shopping centres and office parks are proving particularly attractive, promising a stable high-scale rental yield from a steady stream of commercial and business clients.

Favourable exchange rates

Although ‘Brexit’ has caused considerable uncertainty among potential property buyers from within the EU, it has acted in the favour of investors from other parts of the world. The UK’s referendum has led to more favourable exchange rates with the dollar and other global currencies, and those wishing to send money from USA to UK will find that a weakened sterling means better value for them. Similarly, in many cases overseas property investors can now buy UK property for far less than they could a decade ago, even if the property has actually increased in value in real terms, due to the difference in exchange rates.

Rising population

The year 2015-16 saw the sharpest rise in the UK population for 70 years, with the biggest growth being in London and the surrounding areas. The population of Britain currently stands at approximately 66.4m, following population growth of around 400,000 per year for the past few years. Calls for up to 300,000 new houses to be built every year to alleviate a growing housing crisis have so far resulted in little action, so demand is far outstripping supply.

Generation rent

Much has been presented in the UK media about ‘generation rent’ and certainly far more Britons are renting than ever before. Combined with the growing population and the high demand for housing this presents a favourable situation for property investors. 11% of the total housing stock is thought to be given over to rental properties, while one-third of Londoners now rent, compared to just 15% in 2001, and rents in the city are the highest in Europe.

Resilient property market

The British property market is seen as being particularly stable and safe, with property – especially in London – sure to increase in value over the long-term. Even though property values in London have fallen slightly in recent years – 0.7% in 2017 and 6.3% in 2018 – they are expected to stabilise in 2018 and to grow up to 20% over the next five years. Although the city and the country in general are not immune to housing bubbles that can suddenly burst, the market will always recover, especially in the residential sector.

With London property prices having risen up to 700% in some areas over the past 20 years and prices currently looking very affordable, especially to overseas investors, there’s never been a better time to buy into UK property.