Investing in UK Property: What the Data Tells Us
Property investment in the UK is an attractive proposition, and it is easy to understand why. Buying a home with the potential of making a return on your investment while...
4 min read · May 2023
Property investment in the UK is an attractive proposition, and it is easy to understand why. Buying a home with the potential of making a return on your investment while providing a roof over your head can be an appealing offer, but what does the data tell us about the current state of the market and what kind of opportunities are available to potential investors?
In this blog, we will take a detailed look at the latest data surrounding property investment in the UK, revealing the key information that could help savvy investors make informed decisions about their investments.
First, let’s examine the latest commercial property yields. According to the latest research by the British Property Federation (BPF), as of January 2021, the yield on prime retail warehouses is 7.7%, offices were at 5.7%, and industrial warehouses were at 6.4%. This suggests that investors looking to buy into the commercial property market have attractive options that are likely to yield good returns over time.
The BPF also examined regional variations in the rental yields of commercial properties. Generally, prime yields in London and the Southeast are lowest at 5.5% and 5.4%, respectively. On the other hand, the North West of England is the most profitable area for commercial property investment with yields of 9.1% for prime retail warehouses, 8.9% for prime offices and 8.3% for prime industrial warehouses, indicating that investors are more likely to yield a good return in this region.
When it comes to residential property, data from the UK’s Office of National Statistics (ONS) show that the average house price increased by 8.8% in the year up to February 2021 – a record high. The South East of England saw the largest increase in house prices with an increase of 12.0%, while the North East saw the smallest increase at 5.3%.
The ONS data also revealed that the number of first time buyers (FTBs) increased by 19% in 2020, with an estimated six and a half million FTBs across the UK.
However, the coronavirus pandemic has had a major impact on the availability of new homes and the availability of mortgages, with potential buyers finding it difficult to access the finance they need.
In a bid to help potential buyers get onto the property ladder, the government introduced the Help to Buy scheme last year, meaning FTBs can obtain a 20% government loan on a property valued at up to £600,000. Also available is the Lifetime ISA (Individual Savings Account) which provides up to a 25% bonus when it is used for a deposit on a property valued at up to £450,000.
For investors, London remains the most popular region for buy-to- let investments. In fact, London accounts for 34% of all buy-to-let mortgages issued in the UK, according to the Intermediary Mortgage Lenders Association (IMLA).
In terms of the most profitable regions for buy-to-let investors, the North West of England tops the list with a yield of an average of 5.7%, followed by the West Midlands with a yield at 5%.
In spite of this, investors could potentially have higher returns if they opt to buy property in one of the rising hotspots, such as the South West of England, the South East of England, the East Midlands and Scotland, which all have average yields of around 4.5%.
Although some regions are seeing higher returns than others, UK house prices remain relatively stable and it is unlikely that there will be a significant fall in prices in general. Since the introduction of Help to Buy in 2013, there have been no signs of a major crash in prices, with house prices gradually increasing in the past six years.
Overall, UK property remains an attractive option for both long-term investors who are looking to build a portfolio over time and short-term investors who are in search of quick returns. Despite the rapid rise in house prices in the past year, the range of options available in the UK market for both residential and commercial properties continues to be attractive, offering good returns for investors.
For potential investors, researching the latest data on yields, house prices and regional variations can give a valuable insight into the best areas to invest in, helping them make informed decisions when investing in UK property.