UK Property Investment Market 2022 Review
Everything we know so far about the UK property market, factoring inflation, Brexit, covid, and how the current financial economic climate is affecting our decisions when buying or selling UK property.
Being in a position of sourcing and managing property investment in various sectors from traditional BTL, Student, HMO, and Serviced Accommodation, and dealing with property investors new or experienced, I hope sharing our views in this blog may help with your short and long-term decision-making.
What we know
The Bank of England increased their base interest rate up to 2.25% following the recent new government mini-budget, which is still changing, all UK lenders and brokerages have increased their interest rates and fees by around 6%, pricing out most home buyers and also creating a pause affect within the BTL market. Currently, countless meetings taking place in Downing Street with the heads of high street banks and our chancellor, although unsure of how the government can step into force change, we are still yet to see any form of indication of a slowing down. Inflation is at an all-time high and is forecasted to reach around 10/11%.
On the back end of the UK lockdown, we have seen a huge surge in housing demand and property prices inflating at growth rates of 10%+ within 12-month periods across the England and Wales regions. My property within two years has grown by around 25% which is unrealistic given historic averages.
What we forecast on how the property market will be affected
£GBP to $USD has encountered a 30% drop and we have all encountered this before which was around the 2007/2008 market crash. There are other indications to work with here for example interest rates also being at their highest since 2008 around the market crash. Now although I’m within the property sales industry I do foresee a property market correction and predict property prices, especially those that have been overpriced post-lockdown due to the high influx in demand will encounter slight reductions. The first areas to be hit I believe to be the premium-priced areas such as your city center properties and high-priced housing estates. The effect on your previous or new investments will depend heavily on the price you pay or have paid. If you own a £200,000 property on the fringe of a city, I do not see a huge impact on these types however for those that have recently bought or planning to purchase at £400,000/£500,000 city apartments you could experience a bigger impact, especially with mortgage payments.
The solution
We know the problems the UK property market faces, so now need to look at ways of how property investment can still work for you now and future. Investing is a need as opposed to something we simply want, money in the bank is losing its value, and stock trading is more volatile than ever which will come with its risks. The UK property market is resilient, and the history books will always show one direction of growth, regardless of economic and political turmoil, so investing in property can still be lucrative and secure your financial freedom for the future.
For overseas investors with the £GBP being weak or simply cash buyers
All this investment concern can be simplified given you are not within the realm of mortgage interest rates, I would strongly recommend researching the student sector, and property prices from £55,000 - £80,000 you do not pay any stamp duty and simply sit on incoming yields of 7%+ net all fully managed for you. Student property values are secured by rental income a higher demand for rental property now than ever before, and of course, add in that student rentals like this are paid direct from student loans, they are commercial property, so the values do not increase with the standard residential market, but this also means they don’t decrease like the residential market. This investment model offers security in retaining its value and security in rental profits. For overseas investors regardless of what UK property you decide to purchase your already buying 30% less due to the weakened £.
For Investors seeking mortgages or cash buyers. The solution for you is a little more detailed within the residential sector
Investing in the residential market with finance or cash your concerns are completely valid, however, I would still recommend serviced accommodation, holiday-let styled properties, or properties within high-demand areas, although I recommend this, keeping your property price investment of £250,000 and below. Lower-priced short-term let properties will create higher incomes than your traditional let, traditional let in my opinion doesn’t make any sense given you are most likely covering mortgage costs with income. With serviced or holiday let type of investment you can off-set your running costs against your taxable income, which also includes your mortgage interest rate, if you do not know about the tax benefits with this investment you need to seek advice from an accountant, you must be aware of the benefits then all this makes sense. We have the property of around £200,000 that can generate under our management a conservative £18,500 profit, factoring in the 6% interest rate (repayment) you will still make £500+ profit per month after all running costs also being fully managed. We also have cheaper properties from £120,000 which would mean your mortgage interest impact is a lot less again.
For properties within the UK in high-demand areas yet still at cheaper prices, I do not see that much of an impact even after I have factored in the impact of the previous market crash of 2008. Demand will always outweigh supply with UK property, the stats on the National House Price Index is evidence of that.
UK HP Since 1952 - Nationwide House Price Index
I suppose it’s about being a little savvier with your investment choices, research, and speaking to the right people, we have a strong and resilient property market in the UK and if we encountered any dips or corrections in prices this will be reverted to normality in a quicker time scale than the crash of 2008 which took around 8 years to bounce back. Demand is higher, less off-plan developments and fewer properties to purchase.
