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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 40.8, which is an impressive number.
The United Kingdom remains a stable country due to its robust democratic institutions, including a constitutional monarchy and a parliamentary system that ensures a balance of power and effective governance. Additionally, its strong legal framework, independent judiciary, and well-established financial sector contribute to economic resilience and social stability.
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 2024 with a growth rate of 0.5%, which is not much. Regarding 2025, the experts say 1.5%.
However, this low number is just for the short-term, as the UK's economy is expected to increase by 6.6% during the next 5 years, resulting in an average GDP growth rate of 1.3%.
A moderate growth rate in the UK property market suggests stability, reducing the risk of sudden price drops and making it a safer investment. Additionally, steady growth can lead to consistent returns over time, making it an attractive option for long-term 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. Yes, it can be interpreted as "excellent".
Examining the data more rigorously, we notice that optimism was already around the corned 12 months before, with a score of 101.
The impressive level of business confidence among local businesses in the United Kingdom holds promising implications for prospective property buyers. This robust confidence reflects a positive outlook on the country's economy, potentially leading to more job opportunities and higher incomes. Such optimism boosts property demand, creating a favorable environment for investors to generate rental income and potentially benefit from 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 (+4% 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 2025.
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 expected to be minimal
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 1.0% over the next 5 years, with an average annual increase of 0.2%.
This data shows that the UK will likely experience almost no inflation. If you buy a property now, you may experience lower appreciation potential and reduced returns on investment.
Is it a good time to buy real estate in the UK then?
Let's wrap things up!
2025 is shaping up to be a promising year to invest in property in the UK, and there are several compelling reasons for this. Firstly, the United Kingdom is known for its stability, both politically and economically. This stability provides a solid foundation for property investments, as it reduces the likelihood of sudden market fluctuations that could negatively impact property values. When you're considering a long-term investment like real estate, knowing that the country itself is stable can offer peace of mind.
Looking at the economic forecast, the UK's economy is expected to grow by 6.6% over the next five years, which translates to an average GDP growth rate of 1.3% annually. This moderate growth rate is a positive sign for the property market, as it suggests a stable environment with reduced risks of sudden price drops. For investors, this means that property values are likely to appreciate steadily, offering consistent returns over time. It's a safer bet compared to markets that experience rapid and unpredictable changes.
Moreover, UK house prices are entering a period of stabilization. This is great news for potential buyers because it means that the market is not overheated, and there are opportunities to purchase properties at fair prices. A stable housing market is less likely to experience dramatic downturns, making it an attractive option for those looking to invest in real estate. For long-term investors, this stability can translate into reliable growth in property value over the years.
Additionally, the UK's population is growing and becoming slightly wealthier, which can drive demand for housing. As more people look for places to live, the demand for rental properties is likely to increase, offering potential landlords a chance to benefit from rental income. According to Numbeo, rental properties in the UK offer gross rental yields ranging from 2.9% to 5.6%, which is a decent return on investment. Coupled with minimal expected inflation, this makes 2025 an opportune time to consider buying property in the UK.
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.
-Will real estate prices go up in the UK?
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.