Is now the right time to invest in UK property? With growth slowing in former high-growth hotspots and a clear uncertainty around the UK economy, it is easy to dismiss the UK as an investment opportunity.
Owner-occupiers are rethinking high-risk property moves, and this is compounded by a rise in interest rates and tight mortgage affordability rules.
Mark Carney of the Bank of England echoed this warning, stating that house prices could be as much as 35% lower than they would have been three years after the disruptive “no-deal Brexit”. This, however, could be interpreted in two ways. Some believe that today´s uncertain market offers ample opportunity for investors to get a property bargain.
The first thing you have to consider is the location of the investment. Areas such as Liverpool and Manchester are continuing to grow, due in part to the development of manufacturing and tech projects creating employment for over 7,000 people, and also the rise in students creating ample student accommodation investment opportunities. However, when looking at Aberdeen, or parts of London, growth appears to be in reverse, according to the latest findings by Hometrack’s.
Director of the housing market at Hometrack´s, Richard Donnell, states “Five cities are 50% higher in price than they were 10 years ago”, with Bristol, Cambridge and Oxford being among these cities. “But there are four cities such as Glasgow and Newcastle that are still at 2008 levels or even lower”. This Is in large due to a low level of activity in the housing market.
Housing transactions have been on hold for four years now, however in central London, turnover is down by 20% over the four years. With fewer buyers on the ground, house hunters are in a position to make greater demands, resulting in fewer transactions. This is also in part due to the gap in asking and selling prices, sitting at 10% in London, when compared to only 2.5% in Manchester.
However, Mr Mead of FT Money claims that “it´s the best time there´s ever been to buy in London”, and says “most people sell because they want to buy bigger. Say you’ve got a £1m house that’s now worth £850,000. You’re trying to buy your dream house, which might have cost you £3m three years ago, and you can probably buy it now for £2.25m. Who’s winning there?”
Mr Meads argument certainly holds merit and is supported by independent agent Henry Pryor. “Uncertainty is bringing with it opportunity because people don’t know how their sale is going to go”, states Mr Pryor, “and as a result, people are jumping the wrong way. Sometimes people are selling for less than they might have been able to get”.
Of course, there is no escaping the uncertainty around how the Brexit deal will play out. Will a good Brexit deal cause prices to surge, or will they plummet? It is predicted that prices could drop by a further 5% by the second quarter of 2019 as the political situation comes to a head.
However, investors may see their investments pay off if the UK is able to negotiate a soft Brexit deal, which in light of recent events, we cannot guarantee. FJP Investment suggest that those who pre-empt the Brexit deal will have an opportunity to have bought up the best assets at the best prices.
As the saying in property goes, “the turning point is either six months away or six months ago”, and it could be that the investment market is approaching one of these unseen changes of direction.