The post-Brexit UK property market offers strong long-term profit potential for international buyers, according to experts.
Britain’s freshly-minted EU deal and the rollout of the Covid-19 vaccine in the first half of 2021 will boost the country’s post-pandemic economic recovery, leading to house price growth of eight percent on average by 2023, said UK-headquartered property consultants Hamptons International.
However, there will be short-term flat growth in 2021 as the economic consequences of a coronavirus-induced recession pull the housing market from its long-term growth trajectory, according to Aneisha Beveridge, head of research at Hamptons International.
“Following the end of the stamp duty holiday in April we expect the housing market to weaken, particularly as unemployment is expected to peak around this time too. But an economic recovery in H2 2021 will support the housing market, and we expect house prices to stabilise towards the end of the year,” Beveridge told Arabian Business.
“International buyers purchasing a property in the UK will face an additional two percent stamp duty surcharge from April and so we expect to see a rise in the share of homes bought by foreign based buyers in Q1 2020,” she said.
London will underperform the average UK growth rate, with prices forecast to rise six per cent by 2023
The weakness of sterling has meant that UK property has remained appealing over the last few years, despite Brexit uncertainty and a wider global economic slowdown, added Beveridge.
The West Midlands, the region that had the highest furlough take-up rate at the peak, is set to see the biggest price falls next year at -1.5 percent, Hamptons reported.
London is predicted to fall by -1 percent and the East Midlands by -0.5 percent, however six remaining regions will see prices rise between 0.0 percent and 1 percent (see chart below).
Northern UK to lead growth path
By 2022 and 2023, the housing market will return to its longer-term growth path, with prices expected to rise by 2.5 per cent.
“House prices are likely to rise in line with household incomes and will be supported by low interest rates. As a result, we think prices in Britain will rise 2.5 percent in 2022 and 3.5 percent in 2023, with increases across all regions. This puts house price growth over the next four years at eight percent across Britain,” the Hamptons report said.
The greatest price growth will come from regions where affordability barriers are less of an issue, and typically from the regions where prices have lagged behind. Prices in the North East will rise four percent in 2022, followed by Scotland at 3.5 percent, Hamptons said.
Over the four-year period, the West Midlands to record the weakest house price growth, due to the effect of Covid-19 on the local economy, with prices expected to rise 4.5 per cent.
The North East will see the biggest price rises over the next four years, rising 11.5 per cent. London will underperform the average UK growth rate, with prices forecast to rise six per cent by 2023, according to the report.
According to Dave Seed, managing director at Qube Residential, a UK-headquartered property management firm specialising in the new-build sector, the northern city of Manchester in particular remains one of the UK’s most attractive property investment hotspots.
“Its market is buoyant and has been massively resilient despite the turbulence that COVID-19 and Brexit have wrought,” he said. “Manchester’s population is set to increase by 20 per cent by 2025; and despite having a growing number of residents and several thriving sectors, it still boasts a much lower investment commitment than London.”
Qube, which has a client based largely based in the Middle East and Asia, has recorded yields ranging from 5.5–7 percent on its new-build investments.
“We find that rental demand is consistently high, thanks in part to the city region’s young population – it has the highest graduate population of any UK city outside of London. Demand far outweighs the rate of residential supply and completion of resi schemes, and we don’t anticipate this slowing any time soon,” said Seed.
Manchester’s profile on both the global and national stage is increasing, which means its potential as a hub for investment will increase in tandem, added Seed.
‘Conflicting’ outlook
According to Tom Bill, head of UK residential research at property firm Knight Frank, the only thing buyers and sellers can be certain about next year is that the pandemic will end.
“As a result of government support measures, bank forbearance, a mass vaccination programme, ultra-low interest rates, the end of no-deal Brexit uncertainty and the wide range of pandemic-related outcomes across different economic sectors, we expect house prices to be relatively static in 2021,” said Bill.
“In the short-term, I struggle to think of a time when buyers from the Middle East had to interpret such conflicting signals,” he added. “On the one hand, the worsening virus news will make international travel more difficult. On the other, the vaccine rollout means buyers can start planning again.”
Despite the prospect of a stronger pound, a wave of pent-up demand from overseas buyers will be released as travel restrictions are relaxed, Bill said.
“We expect this to drive an overdue period of house price inflation in prime London markets,” he said.
The prime central London (PCL) housing market has looked “good value for some time”, according to UK property firm Savills.
“We expect PCL to be a particular focus for Middle Eastern buyers once travel restrictions begin to ease. Prime properties in counties such as Surrey and Berkshire are also likely to popular among those looking for property beyond, but within striking distance, of the capital,” said Lucian Cook, Savills UK head of residential research
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