Will 2022 be the year to invest in UK property?

Will 2022 be the year to invest in UK property?

The UK is one of the world’s most popular countries in which to invest in residential property. It’s not surprising.

According to a report by DLA Piper, the law firm, which was published at the end of 2020, the UK continued to be an attractive country when it came to investing in the sector. In its survey of 500 high net worth investors and asset managers, one third said it was planning to invest in UK bricks and mortar, while those whose headquarters are in China and the USA rated the UK as the best place to target.

Our European neighbours also saw the benefits of investing in the homes sector here, with those in France, Germany and Italy placing the UK third in its rankings for property investment.

What’s the future?

So, will this trend continue? We see no reason why not.

Demand for homes is increasing and there is a growing appetite to deliver more homes across the country. Local authorities are currently consulting with residents about new draft plans, which include local targets for delivering homes over the next two decades. In London alone, the Mayor has identified that the city needs to build 66,000 a year to provide enough accommodation for current and future Londoners, while in Greater Manchester, the Mayor said in its draft plan that it wants to build 165,000 homes over 16 years.

Demands for city living

Earlier this year, a report by JLL said the bounce back towards city living, following the lifting of Covid-19 restrictions, was driving demand in many cities, and this would result in strong house prices and rental growth in both London and in the main cities in the UK.

JLL also said that the housing market had seen the highest level of house price growth since before the EU referendum in June 2016, thanks in part to the extended Stamp Duty holiday and the 95% Mortgage Guarantee scheme. And the latest report from property portal Zoopla predicts there will be a 3% increase in UK house prices in 2022, but warns there could be 20% fewer transactions next year because stamp duty will be back to pre-pandemic levels.

Key regional cities will continue to provide investors with good return on investment compared with London. We are seeing Birmingham, Manchester and Leeds attracting strong investor interest because of the high demand from renters and potential for strong capital growth.

Why do investors still flock to Birmingham?

Birmingham has long been a popular city among people looking to invest in UK property from both the UK and overseas: it’s not hard to see why.

England’s second city is among Europe’s youngest, with 60% of the population under 35, with young professionals eager to make their careers and lives here. In 2018, more Londoners moved to Birmingham than the other way round and it continues to be a popular destination – especially when you consider that global heavyweight Goldman Sachs chose to bring its UK headquarters to the city, instead of selecting Frankfurt or Paris.

This vote of confidence in the city was one in a long line of businesses choosing Birmingham: Deutsche Bank has a large presence here, while HSBC chose the city for its British HQ. And, according to the Centre for Entrepreneurs, Birmingham is home to more start-ups than anywhere in the country, except London.

The building of HS2, which will cut train journeys to London to under an hour, and the Commonwealth Games, which are being held in the city in 2022, are also valuable catalysts for the city’s growth.

This, coupled with other massive redevelopment projects across the city, is good news for people looking to invest in UK property – especially when you see that Birmingham is predicted to be the leading city for property price and rental price growth in the UK by 2025.

According to these findings, property prices are expected to grow 4%, 5.5% and 5% annually between now and 2025, while rental growth values are also forecast to rise 3.5% in 2022, 3% in 2023 and 2024 and 2.5% in 2025.

Returns on investment are also forecast to be stronger in the Birmingham market than that in the capital at about 6.6%

With the buy-to-let market in the UK now worth an estimated £1.4 trillion – and buy-to-let properties rising in value by about 5.8% year on year, according to Shawbrook Bank – you can see why overseas investors are choosing to invest in UK property.