Investor appetite for buy-to-let property didn’t diminish after Brexit and the latest UK House Price Index report from The Office for National Statistics stated that average house prices in the UK increased by 4.5% in the year to October 2017. So what should property investors in the UK and abroad be thinking about in 2018?
Location: The North West will remain a strong spot for investors
Manchester was one of the buy-to-let hotspots of 2017 and the rapid growth in jobs and population saw investors and developers clamouring for real estate in the city. Liverpool sits slightly behind Manchester in terms of popularity but the huge student population and £5 billion redevelopment of the city’s waterfront means the city is almost keeping up with its neighbour.
However, Manchester and to a lesser extent Liverpool, have become less affordable for some investors who are starting to turn their attention to Yorkshire, Nottingham and the smaller growing outside of London.
London loses its appeal in 2018
After a long period of rising house prices across London and chronic undersupply, investors have been priced out of the market and renters are struggling to pay for less space. In London, tenants are paying £100 per sq. m. compared to around 15 sq. m. for the same price in Bradford.
The Royal Institution of Chartered Surveyors (RICS) have suggested that house prices in London and the south-east will fall in 2018 and the UK is set to outperform London in house price growth over next five years says JLL UK Residential.
Smaller regional areas get greater attention
Some of the UK’s smaller cities and towns may be less well-known to international investors but if they exhibit the classic market drivers of: an increasing population; expanding and growing job market; and new large-scale infrastructure projects, investors should be considering these places as viable options for buy-to-let investment.
With lower entry price points than cities like Manchester which are growing fiercely, combined with the promise of catch-up growth because of government programmes like the Northern Powerhouse and the Midlands Engine, these lesser known cities are good investment options in 2018.
Interest rates will stay low
The Guardian reported that another 0.25% hike is expected in the first half of the year, taking the Bank of England base rate to 0.75%, although that is likely to be the only increase in the year.
For those with a mortgage, that will add £22 to the typical £175,000 tracker mortgage, but with more than half of all borrowers on fixed rates, it will probably go unnoticed by most homeowners and will only marginally affect portfolio property investors.
Housebuilding to increase
The need for new homes has been recognised and has moved up the government’s agenda over the last year with the publication of the government’s housing white paper. Back in November, the UK Prime Minster Theresa May promised to take “personal charge” of solving the housing crisis.
As a result, new home building in the UK has picked up with 217,000 homes coming on to the market in 2016-17, up 20% on the year before. But that only brings the total back to levels seen before the financial crash, and a long way short of the 300,000 target set by the government. The supply side of the housing equation will be less pressing than in previous years.