The UK Property Market – A Sanctuary for European Investors?

Whilst the EU struggles to keep the euro alive, the latest report by global property consultancy Knight Frank discovers that at the moment, the UK property market functions as a financial sanctuary for European investors.

The UK Property Market – A Sanctuary for European Investors?

The euro is currently experiencing a sharp decline of its value: As of now £1 is worth as much as €1.3187 – the euro’s weakest rate ever against the British pound. Although the exchange rate appears to currently not be in favour of Europeans looking to invest into the UK housing market, the reality is that for savvy investors the British market offers huge benefits. Not only is having a diverse portfolio a plus, but receiving rents in the British currency further increases their yields.

In order to restore the Eurozone and prevent further deflation, the European Central Bank (ECB) announced its plans to attempt quantitative easing (QE). In theory, the supply of money will increase (in this case the ECB will inject £834billion into the EU market), aiming to keep interest rates low and in return, encouraging borrowing and thus creating an upsurge in public spending. So far QE has been conducted successfully in both the American and British economy; however, with such a diversity of different economies and banking systems, the stabling of the Eurozone is going to take some time.

Nevertheless QE is going to boost the British property market, according to Knight Frank. 2014 was an exciting year for the property market as house prices in England and Wales rose by 3.4% and rents by 1.7%. Altogether the investment volume of the housing market stands at £3.1billion as of January 2015. Knight Frank reports that the biggest returns to be obtained can be found outside of London in the regional markets. Whilst house prices in general continue to grow, the value of properties in prime central London fell by 0.1% this January.

Average gross yields in cities like Leeds, Bristol, Birmingham, Manchester and Glasgow were as high as 6.3% in the last quarter of 2014. House sales across England and Wales grew, whereas the capital continued to show signs of its market cooling down: in the past few years 22% of London’s boroughs saw a decline in house sales.

According to data from the Office for National Statistics (ONS) the average value of a house in the UK is now £272,000, 9.8% more than 12 months ago. This means that over the past year house prices typically rose by £2,221 per month. Property is increasingly becoming a popular investment opportunity, as many consider it an addition or even alternative to their regular pension. Nevertheless, data shows that demand is still larger than supply in the UK. In fact, experts estimate that the country needs at least 500,000 additional homes to be built to meet current demand.

the average value of a house in the UK is now £272,000, 9.8% more than 12 months ago

So what does this mean for the British property market? Property market experts such as Hometrack predict that we will see a strong shift in the market towards regional cities such as Liverpool, Sheffield and Glasgow. Knight Frank additionally state that the regional market offers national investors a great investment opportunity, as buying into the capital’s market remains pricey and time consuming. With the general election on the 7th of May this year, housing prices and its surrounding regulations are one of the main and most talked about priorities for many political parties, as Britain is currently enjoying a prosperous phase thanks to the strength and stability of its own currency.

Intus Lettings vertical - April 2019

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