Reasons why savvy investors should buy UK property in 2018
What can investors in UK property expect in 2018? Will the uncertainty of Brexit depress prices? Will the economy collapse, leaving the government’s fiscal plans in tatters?
Read on, and discover why off-plan property investment in 2018 could be the best investment you’ve ever made.
The UK economy – a sleeping tiger, waiting to roar?
2017 has seen the UK economy and house price growth slow. But there hasn’t been the collapse in either that so many predicted would happen when the UK electorate voted to leave the EU.
While economic growth forecasts announced in the Autumn Budget pointed to a slowdown in the rate of growth, most analysts now don’t believe that the UK will enter a recession for at least five years. In fact, since the Brexit vote, bullishness for the long-term prospects of the UK economy have increased. Here’s a snapshot of current thinking:
- Analysts like Patrick Minford believe the UK will race past its European counterparts after March 2019.
- Think tanks like The National Institute of Economic and Social Research (NIESR), believe similar. The NIESR believes that 2017/18 will be a trough in growth.
- Organisations like PwC now believe that the UK’s economy will grow faster than other large European economies all the way through to 2050, post-Brexit. PwC forecasts that the UK will grow by an annual average of 1.9% through to 2050, making it the fastest-growing of the G7 economies.
In economic terms, the UK could be a sleeping tiger waiting to roar. It bodes exceptionally well for the fundamentals that drive the potential for off-plan property investment in the UK:
1. Infrastructure
The UK is receiving enormous investment in its infrastructure. From roads to rail, to the digital highway, and housebuilding, central government, local authorities, and private businesses are pumping money into the UK.
High-Speed Rail is going to transform travel times between all the major cities in England. Travel times are going to crash, as connections between north and south improve. Cities like Birmingham will become commuter cities for people working in London! Talking about London, Crossrail 2 will make travel across the capital easier and faster.
Investment in infrastructure isn’t restricted to rail transport. As you can see from the National Needs Assessment, plans are being put in place (through to 2050) to provide infrastructure in areas as diverse as:
- Road
- Air
- Technology
- Oil and green energies
- Education
- Housing
- Water
It is spending on an unprecedented scale. It’s going to create jobs, increase business, and provide incredible property investment opportunities.
In the Autumn Budget, Philip Hammond announced tens of billions of pounds in investment to support the housing market in the coming years. Billions more have been earmarked for high-tech, scientific, and digital economies across the UK. Cities like Manchester, Leeds and Birmingham will be direct beneficiaries of the commitment to build a highly productive, new-age economy.
2. Regeneration
The government’s plans include increasing the number of new homes built each year to 300,000 by the mid-2020s. Efforts will be concentrated on brownfield and inner cities. We can expect swathes of derelict sites to be transformed, as regeneration is supported by streamlined planning and massive infrastructure investment.
We already see this happen in cities up and down the UK, such as the changing skylines in Birmingham, Manchester, Liverpool, Leeds, Sheffield, Newcastle, and London.
A more accommodative planning policy is being instigated in all these cities. It is going to be helped by the devolution of budgetary control from Westminster – giving greater ability to promote and part-fund regeneration projects.
Developers are creating inner-city estates that are designed for today’s lifestyle needs: proximity to amenities, recreation, transport, and work.
3. Demand vs. supply
Demand is not expected to fall. Forecasts still predict that we won’t be building enough new homes to meet demand. The government’s target of 300,000 new homes built each year by the mid-2020s has been forecast as the level of demand needed in 2020.
If there is one thing that economists should understand, it is that when demand is higher than supply, prices will rise.
4. Business investment is high
Business investment is increasing in the UK, despite the ‘economic uncertainty of Brexit’. According to ONS data, in the second quarter of 2017:
- Overall investment spending was £81.1 billion
- Business investment represented £45.7 billion of this total
- Business investment increased by 2.5% compared to the same period in 2016
When you hear people talking about business investment faltering, it simply isn’t true. And don’t take my word for it, that is the opinion of the Financial Times, as published on October 8th 2017.
In 2016/17, there was a record number of foreign direct business investment projects in the UK (Department of International Trade). These investments helped to create 100,000 new jobs. The UK was the top destination for inward investment in the EU.
We’ve seen businesses like Peugeot, Ford, and Deutsche Bank commit investment into the UK, as well as increasing investment into the technology, renewable energy, life sciences, and creative industries. London has benefitted from record investment in its tech sector in the first half of 2017: more than any other six-month period in the last decade.
So, is property investment a wise decision in 2018?
Are you kidding? Property investors will be able to take advantage of:
- An economy that is still moving forward and expected to accelerate from 2019
- Massive spending on infrastructure
- Regeneration creating places where people want to live
- Demand for homes that continues to outstrip supply
- Record inward foreign direct investment and higher domestic business investment
House prices are still moving higher, and beating inflation. And, contrary to previous forecasts, inflation is expected to fall in the next few months. It could be that the rise in interest rates expected to be made by the Bank of England might be less than previously thought, too. Great news for affordability, and great for house prices.
Invest in off-plan property to take advantage of the long-term potential for property UK
All the foundations are in place for profitable investment in early-stage off-plan property. Right now, with so many investors prevaricating because of Brexit, there are some incredible opportunities to buy in the best places to invest in property UK. Here’s how to pinpoint them:
- Ensure that there is existing infrastructure (or planned infrastructure) that provides transport, work, retail, recreation, and education facilities.
- Concentrate on areas that are undergoing regeneration, or have planned regeneration schemes. It should provide growth for years to come.
- Look also at the local economy. Is the area reliant on a single company or industry, and what are the local business associations doing to diversify?
- Just to be certain, check a second time that you are investing in areas that benefit from a great retail and leisure offering (people choose where to live for lifestyle as well as work), with good education establishments close by.
You’d hope that the developer of new build property is selling off-plan property in a location that it has researched fully. But this isn’t always the case, so you should always do your investment research.
Our property investment guides are compiled using 108 data points across 324 areas of the UK. We start at the macro level (location), before drilling down and ensuring that all the following ‘dominos’ line up:
- Shops
- Schools
- Transport links
- Major employers
- Major investment
We then continue by inspecting the development and conducting internal and external inspections.
Here’s a secret for the most profitable off-plan property investment
Not all off-plan property is equal. Developers will sell off-plan property in several tranches. The sooner you buy, the wider choice of units you’ll be offered. It means that you get the pick of the bunch: location on development is a factor in the price of a unit, just as the location is a factor in the value of development.
Investing early, you are also more likely to get the best discounts to current market values. It will have a direct impact on your long-term profitability.
To discover more about our current property investment opportunities, contact one of the team on +44 207 923 6100, who will be glad to discuss how you can maximise the potential of off-plan property investment.
Live with passion
Brett Alegre-Wood
