As uncertainty continues in the UK economy, with inflation growing even faster than predicted, a number of headlines have come out on the UK property market.
Many have focused on Rightmove’s data which shows that the price of property coming to the market fell for the first time this year, down 1.3% in the month to £365,173 (-£4,795).
At first glance, this might suggest a cooling in the previously red-hot UK housing market. However, it’s more likely to be the standard seasonal slump seen around summer.
Rightmove highlights that the average June to August price drop is 1.3% – consistent with the current figure. It’s also worth remembering that many sellers and developers are likely holding off marketing new property until the end of summer, when people have returned from holiday.
What’s more, this time last year, the market was at an unprecedented peak, with the stamp duty cut mid-pandemic prompting incredible demand and price increases. This distorts year-on-year results compared to the normal trend.
General upward trend in UK property prices to continue
It’s very likely that September will see prices rising again, in line with this year’s trend. Tim Bannister, director of property science at Rightmove said, “We are still expecting price changes for the rest of the year to continue to follow the usual seasonal pattern, which means we’ll end the year at around 7% annual growth, even with the wider economic uncertainty.”
Ongoing supply vs demand imbalance
One of the reasons for the continuing increase in UK property prices, is the usual imbalance between supply and demand.
Firstly, Rightmove shows that buyer demand is still 20% higher than in 2019. Available homes for sale are down 39% compared to 2019 and agents report that buyer enquiries haven’t dropped significantly, despite interest rate rises impacting mortgage affordability for some.
Rental demand still high
Focusing on the rental sector, ONS data shows rent increased by 3.2% in the 12 months to July, the largest annual growth since January 2016.
For buy-to-let landlords, this willingness of tenants to pay higher rents means some of the rising costs of mortgages can be off-set against higher yields.
Regional variations mean that landlords who purchase in the right area can see larger yields thanks to faster rent growth. For example, London is seeing a 2.1% growth currently (from a very high base) whilst the south-east in general (including the London commuter belt) is experiencing a 3.4% growth.
Index of Private Housing Rental Prices percentage change over the 12 months to July 2022, selected English regions, source ONS.
- East Midlands – 4.3%
- North West – 4.0
- South West – 4.0%
- South East – 3.4%
- West Midlands – 3.3%
- London – 2.1%
Whilst the UK may be heading for recession, investors can still profit from UK property. With tenant demand for homes continuing, UK property as an asset is as attractive as ever. During inflation, a tangible, high-demand asst like UK property is more secure than shares or simple money-in-the-bank.
If you’d like to talk to us about how to invest in UK property, our team of experts is on hand to offer personalized advice. Get in touch today.
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