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Everything you need to know is included in our the UK Property Pack
Are you considering buying real estate in the UK? Are you unsure if now is a good time to make a move?
Market timing is a subject where opinions vary among individuals. Your British friend may suggest that now is the worst time to buy property, whereas your colleague residing in London might have a different opinion and recommend taking advantage of the current market.
At Investropa, when we create articles or update our pack of documents related to the real estate market in the UK, we prioritize facts and data over opinions and rumors.
We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in the UK.
Happy reading, and let's dive in!
How is the property market in the UK currently?
The United Kingdom remains, today, a very stable country
Positive
Stability should be the first thing you look at when you want to invest in real estate because it ensures predictable and reliable market conditions. It is an information you need as a foreigner looking to buy a property in the UK.
You most likely already know that the UK is widely known for its remarkable stability. The last Fragile State Index reported for this country is 40.6, which is an impressive number.
The United Kingdom has a long history of democratic governance and strong institutions, which have helped to ensure stability and continuity in the country over time. Additionally, the UK has a strong economy, a diverse population, and a vibrant cultural scene, which all contribute to its stability and success.
Stability check done. Now, it's time to review the economic forecast.
The United Kingdom will grow at a moderate pace
Positive
To figure out if it's the right time to buy a property, start by checking how well the country's economy is doing.
In accordance with IMF projections, the UK is likely to finish 2023 with a growth rate of -0.3%, which is underwhelming. Concerning 2024, the experts say 1%.
However, the negative growth rates are not here to stay since the UK's economy is expected to increase by 6% during the next 5 years, resulting in an average GDP growth rate of 1.2%.
The moderate growth rate in the UK makes investing in property a relatively safe bet, as it provides a steady increase in value over time. Additionally, moderate growth can lead to steady rental income, making it an attractive option for investors.
Let's now look at other metrics.
British business owners keep radiating unshakable confidence in the economy
Positive
The GDP growth matters, but may not fully reflect business community expectations in property market. Fortunately, in The United Kingdom there is a standardized metric that is regularly published. We're lucky because this isn't true for every country.
Measuring business leaders' confidence in the current and future economic conditions, the Business Consumer Index (BCI) is calculated through surveys and assessments.
According to the Confederation of British Industry's data, the latest Business Confidence Index value is 99 for The United Kingdom.
This is the best score in the world currently. According to the BCC, over half of UK firms (52%) anticipate an increase in their business turnover in the future.
Examining the data more rigorously, we notice that optimism was already around the corned 12 months before, with a score of 104.
Strong business confidence among local businesses in The United Kingdom has promising implications for those who want to buy a property there. It signifies a positive outlook on the country's economy, which can result in more job openings and increased incomes. This positive sentiment drives up the demand for properties, creating an advantageous environment for investors to generate rental income and potentially experience long-term property value appreciation.
UK house prices are entering a period of stabilization
Positive
The United Kingdom's home prices have increased by 25.6% in 5 years according to Halifax and Bank of Scotland.
It means that if you had bought an apartment in London for $800,000 five years ago, then it would now be worth around $1,005,000.
Recently, the housing market in the UK went through a stable period, followed by continuous growth, and later experienced another stabilization phase for house prices.
Stabilizing or declining prices shouldn't be seen as negative. The current period presents a modest market correction, offering real estate investors better prices. A positive signal indeed.
You can find a more detailed analysis of the real estate prices in our property pack for the UK.
Everything you need to know is included in our the UK Property Pack
The United Kingdom's population is growing and getting (a bit) richer
Positive
Population growth and GDP per capita are crucial factors to think about when buying real estate because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In the UK, the average GDP per capita has changed by 0.5% over the last 5 years. The growth, although minimal, is still present. Furthermore, the British population is growing (+2% in 5 years).
This means that, if you purchase a charming cottage in the English countryside and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be an increase in rental demand in UK cities such as London, Manchester, or Edinburgh in 2024.
Rental yields are not crazy in the UK
Neutral
It's time to analyze the rental yields..
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in the United Kingdom is purchased for £500,000 and generates £25,000 in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in the UK offer gross rental yields ranging from 2.9% and 5.6%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in the UK.
It means that the income potential from a real estate investment is relatively moderate.
Everything you need to know is included in our the UK Property Pack
In the UK, inflation is projected to remain moderate
Neutral
Inflation is the phenomenon where prices consistently rise.
It's when your regular pint of beer in London costs 6 pounds instead of 5 pounds a couple of years ago.
If you're considering investing in a property, high inflation can offer you several advantages:
- Property values have a tendency to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
- Diversifying your portfolio with real estate provides stability during periods of inflation.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
In line with IMF predictions, the inflation rate in the UK will increase by 11.4% over the next 5 years, with an average annual increase of 2.3%.
This data shows that the UK might experience inflation soon, so it's worth thinking about buying property now.
Is it a good time to buy real estate in the UK then?
Let's wrap things up!
Undoubtedly, 2024 presents an exceptionally opportune moment for property investment in the United Kingdom, supported by a multitude of compelling indicators that create a solid case. The UK's enduring stability, coupled with its projected moderate economic growth, underscores a secure investment environment. The unwavering confidence exuded by British business owners in the economy bolsters the country's investment appeal.
Furthermore, the prospect of UK house prices entering a period of stabilization signifies an optimal time to consider property acquisition. This suggests that buyers may have the opportunity to enter the market before significant price increases occur. The UK's growing population and increasing prosperity enhance the investment landscape, hinting at a potential for sustained demand for housing.
While rental yields and moderate inflation provide a steady backdrop for investment, the synergy of these elements with the favorable signals paints a compelling picture. In conclusion, the alignment of the UK's stability, growth prospects, confident business sentiment, potential price stabilization, population growth, and moderate inflation rates make 2024 an exceptional year for property investment. The combination of these factors makes the UK a standout destination for investors seeking both stability and potential profitability in the realm of real estate.
We hope this article has offered you practical support!. If you need to know more, you can check our our pack of documents related to the real estate market in the UK.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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