There has been a long period of sustained growth which, over time, has allowed investors to achieve impressive yields (through rental income) and capital appreciation from investments in the UK property market. Since the financial crisis of 2008 UK property prices have increased year on year and are now more than 50% higher in value than just after the crisis.
More recently, the volatility caused by Brexit, COVID-19, and other current economic factors has not hampered the continuing increase in UK house prices, as seen in the exceptional performance in both 2021 and 2022. The UK Government’s Office for National Statistics (ONS) latest available report for October 2022, the average value of a UK home was £296,000 compared to £267,000 in October 2021 which is an increase of 9.6%.
In November and December with the cost-of-living crisis and higher interest rates property values have remained flat. At the start of 2023 the supply of property to the market has increased slightly compared to recent years and early indications according to Rightmove are that asking prices have on average increased by 1% compared to December 2022 which has surprised many who have been forecasting a levelling off of property prices.
As average house price values have increased by more than 50% in the last ten years, this shows that the long-term performance in UK property values is equally as impressive as it has been in the last few years. UK property's steady growth makes it a secure and stable investment opportunity in comparison to other options, cryptocurrency, and short-term stock speculation, for example.
Naturally, there is a reason for this sustained increase, part of which is the long-standing UK housing supply and demand gap. In 2022, the House Price Index indicates a 70% growth in demand for houses, compared to the five-year average with available homes decreasing by 40% in the same period.
This imbalance leans in favour of the investor for two reasons, the first being that the low-supply-high-demand scenario pushes values higher, as any investor who purchased 12 months ago is likely to already have seen. And, secondly, UK residents are finding themselves priced out of the market and turning to rental options instead. This presents the overseas investor with the opportunity to generate income and own an appreciating asset!
Forecasts for the future by UK Real Estate companies show that the cost-of-living crisis, and interest rates will dampen demand in 2023, but still expect there to be over 1 million transactions (Pre-Covid Levels) in the year. Many are predicting that price growth will continue for the foreseeable future due to the long-term change in supply. These forecasts are between 10 to 20% depending on the region in the UK.
Check out our city guides here for more information.
