On 29 March 2019, the UK is gearing to formally cut ties with the European Union; however, as Westminster engages in heated debate about the precise terms of the withdrawal process, there is growing speculation that the UK might in fact leave without a deal in place.
At this critical juncture, property investors are setting out their long-term plans for the coming months and years, exploring how different assets are projected to perform as they adjust to a post-Brexit environment. Many will be looking to recent trends to understand what more immediate effects Brexit might have on market demand for UK property, potential capital growth and the housing supply.
Nonetheless, the prospect of strong rental yields combined with capital growth has made real estate a consistently popular asset class. This is reflected by the fact that house prices have risen over the past 24 months despite Brexit. Moreover, at the height of political turmoil in December 2018 – a time when Theresa May’s proposed Brexit deal was overwhelmingly rejected by her colleagues – property transactions were up 3.6% year-on-year.
Competition for property remains strong
Despite fears that Brexit ambiguity would ward off investors interested in buying property in the UK, the reality is that the residential property market has witnessed robust levels of sales since the 2016 referendum. This is the case even within the capital, which has admittedly experienced more subdued house price growth when compared to other regions.
London’s prime property market, for instance, witnessed a total of £4 billion worth of sales in 2018 in the £5 million plus sector of the market, an impressive rise of 10% year-on-year, according to the latest market intelligence report from Savills.
On a grander scale, bricks and mortar remains a popular asset class among those seeking safe and secure returns. A recent report from the National Association of Estate Agents revealed that demand from prospective buyers increased by 8% between November and December 2018; meanwhile, year on year demand was up 13%.
It may come as no surprise that some prospective homebuyers are playing the waiting game, holding off on their investment intentions until the outlook becomes clearer. What is certain, however, is that the UK housing market will remain fiercely competitive and we could see property transactions picking up pace in the latter half of the year.
The rise of regional hotspots
With affordability constraints naturally inhibiting prospective buy-to-let (BTL) investors from purchasing a property in London, many investors have been looking beyond the capital to regions such as the Midlands and North of England.
Popular university towns like Birmingham are benefitting from significant volumes of public and private sector investment, with major improvements being made to the city’s transport links and infrastructure. As a result, house prices here have been growing twice as fast as the national average at an impressive 5.6% per year.
Importantly, these regional markets are attracting strong interest from BTL investors keen to participate in the student lettings market. With year-round demand for accommodation, the prospect of regular rental yields from university students is a promising option for those looking to make potential long-term rental yields on an investment property.
Taking advantage of BTL investments through fast finance
The UK real estate market is inherently competitive, and for those seeking to invest in bricks and mortar in 2019, access to fast capital will be vital. The challenges faced by those attempting to secure mortgages can result in lengthy delays. Last year, Market Financial Solutions revealed that 31% of UK adults who have had an offer accepted on a property in the last ten years had experienced a deal falling through before completion. Of those, a third (33%) said the reason their deal collapsed was that they encountered problems due to delays from their mortgage lender.
With Brexit looming over the UK’s property market, traditional lenders are likely to remain hesitant to provide credit, and this may result in a slowdown of mortgage approvals across the country. BTL investors seeking to take advantage of property opportunities in 2019 must, therefore, ensure they have fast and reliable access to finance, and consult with brokers who have the knowledge and expertise when it comes to specialist lending options such as bridging loans.
Looking forward
Brexit may pose an immediate challenge for the UK, but this shouldn’t discourage those looking to BTL investments as a long-term commitment. Given that housebuilding will continue to be a Government priority over the coming months and years regardless of how Brexit will eventually unfold, BTL investors are encouraged to keep a watchful eye on developments taking place within these sprawling urban hubs.
Meanwhile, high demand for housing and a surge of construction projects being undertaken across the country ensures that investors won’t lack avenues to direct investment towards in 2019. More broadly, the UK property market has demonstrated time and time again its resilience and ability to quickly recover from economic and political shocks, and I am confident it will remain a resilient asset during, and following, Brexit.
Paresh Raja, CEO, Market Financial Solutions
