A new study has shown Simon Morris that the current housing shortage, along with favourable economic conditions, has made the UK a hotspot for residential property investment.
In the wake of the financial crisis, the UK has developed a robust economy that records impressive expansion margins year-on-year. Data from the BBC’s GDP tracker showed that the UK’s economy grew by 2.6% in 2014. This is a significant rise from the 1.7% growth rate recorded in 2013 meaning that last year, the UK’s economy expanded at its highest rate since 2007.
This has supported the growth of the UK’s residential property market. The Office for National Statistics’ June 2015 house price index shows that the UK’s average house price expanded 5.7% in the year to June 2015. At the same time, the UK currently has a housing shortage. Sky News reported that the Royal Institute of Chartered Surveyors (RICS) said that the UK’s housing stock has depleted so much, that they only recorded 47 properties for sale, per surveyor, in their latest poll.
Residential investment hotspot
A new study has claimed that combined, these factors have turned the UK into a hotspot for residential property investment. City Wire reported that research conducted by Savills indicated that the UK housing market, which saw prices grow 20% in five years, is the fourth best residential property sector in the world for investment.
Only the US, United Arab Emirates and Singapore were ranked as better markets than the UK for residential property investment. Commenting on why the UK has attained such a high ranking, the director of world research at Savills, Yolande Barnes, said: “When a growing population, growing affluence and limited housing or land supply converge, we would anticipate real house price growth.”
Yet experts have suggested that UK house prices won’t continue to grow unless the government overhauls housing policy. The head of real assets at Legal and General Investment Management, Bill Hughes, commented: “The crucial thing is getting the planning system to deliver more permissions. I believe planning departments should have a centrally mandated obligation to deliver a certain number of housing permissions.”
Research before you invest
Investors may believe that now’s the time to invest in UK residential property. However Simon Morris would note that you need to account for a number of factors before pursuing this option. For example, the recent emergency summer budget could impact the lucrative buy-to-let market, or even the wider UK residential property sector. As a potential investor, you should conduct extensive research before you commit to investing in the UK’s residential property market.