UK PROPERTY MARKET update: october 2023
October 30, 2023
UK market continues to be the #1 key investment priority for Middle Eastern investors
We start this month’s update with interesting news from a survey of GCC-based investors, that will no doubt appeal to our readers. ‘The GCC Investment Barometer’, surveying UK property investors in the UAE, Saudi Arabia and Qatar found that one third had bought property in London over the last 12 months, 95% had invested in the UK in the last five years and that 93% were planning to make new UK investment over the next five years. The findings show not only the enduring appeal of the UK market, but its strength in the eyes of Middle-Eastern wealth which is often a key trend setter in the UK market; a market, which we’ll now turn to discuss!
What’s happening in the UK property market at the moment?
The headline from Savills’ October report read, ‘A pause in price falls as we enter a period of greater stability.’ This greater stability is exactly what we see when we look at the below chart (2023 is the thick pink line). Despite relatively short-term turmoil affecting the UK market - the war in Ukraine, energy crisis, rising interest rates and the affordability crunch - you can see that the market has remained incredibly level, particularly with regard to other years. What we’re seeing is a return to normal after the unpredictability of the pandemic years. So, what other stats support this return to normal?
Key findings from RICS’ September report (the source data which informs most UK housing market reports) can be summarised as:
“Stretched mortgage affordability still the dominant factor weighing on buyer demand.”
12-month sales expectations have stabilised (as opposed to decreased) in the latest pause in interest rates from the Bank of England.
Month on month incrgeases could be seen in new buyer enquiries, new vendor instructions, newly agreed sales and sales-to-stock ratios.
The report said, ‘Looking further ahead, the twelve-month sales expectations series returned a net balance of +3% (up from -5% last time) which is signalling a much more stable trend in sales volumes emerging over the year ahead.’
Expanding on this, Savills wrote that more first-time buyers were entering the market to avoid increasing rents but also that sellers were adjusting expectations and this, combined with an easing in interest rates, was attracting more first-time buyers back to the market. According to the FTSE 250 agency, first-time buyers accounted for 53% of all home moves in Q3. As we’ve written before, first time buyers are critical to the UK market, some would say without them, there is no market; existing homeowners can’t sell, therefore there’s less liquidity in the market. All this to say, that first-time buyers are once again, dipping their toes in the water is only a positive sign of things to come.
And that’s not it for the good news. A comparison of weekly data across 2023 compiled from TwentyCi data showed no widening gap between listing prices and sale prices, no leap in the number of listings (i.e. owners dumping houses on the market) and that in nominal terms house prices rose (as opposed to real terms). Again, the data does not match the alarmist headlines AT ALL. Investors should be appraising their best buys right now.
What’s happening in the UK rental market?
RICS predict a nationwide rental rise of 5% over the next 12 months, of course some rises may be steeper than that in certain locations. Zoopla and Rightmove both confirmed double-digit growth in asking rents year on year; ‘the imbalance between demand and supply in the mainstream rental market remains,’ commented Savills.
Q3 also saw rental values of London apartments outstripping that of houses.
“‘This reflects a distinction between markets dominated by needs-based renters and those where renting is more of a lifestyle choice…as a result we have seen yields for flats in North and East London surpass 5% for the first time since March 2014 when Savills records began.’”
A boost for Birmingham (and the regions)
In other news, a survey by mortgage platform Landbay showed the confidence in the UK midlands market and the investor appetite for property in Birmingham, which also supported a separate survey of London landlords who were buying more property in the regions than ever before, tempted by the increased yields of up to 9% in certain places. Our current development in Leeds is offering a 6% NET rental guarantee with prices from £110k.
Savills reported how the ‘Return To Work Movement’ was driving quarterly rental growth in Manchester and Birmingham city centres at 4.1% and 3.1% respectively as people sought out city-centre locations over commuter belt ones.
The good news for RPA investors is that we have a raft of new investments for every price point and location; London, Leeds, Manchester and more – take your pick. It’s well worth appraising your options at the moment to compare products and the rental income/capital appreciation you can reasonably expect, enabling you to leverage accordingly. Presently, we’re furnishing our clients with multiple investment options based on their expressed preferences and we’re only too happy to share the figures with those weighing up a purchase.
richard bradstock
Managing Director
about the AUTHOR
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals. The RPA Group was born out of a duty of care to provide property investors with an industry-leading and integral service, one that connects investors with quality and desirable investment opportunities, whilst providing reliable and trustworthy market commentary and analysis alongside, enabling investors to make the best, most-educated decisions for them.