The UK property market is experiencing weak trading conditions. However, despite property growth slowing down as a result of Brexit negotiations, it is predicted that prices will rise across the region in 2019 according to property developer GIHLondon. The UK economy is predicted to grow 1.7 percent in 2019, up from 1.3 percent in 2018 (Jones Lang LaSelle’s UK Market Report, 2019). We believe that the UK will remain a preferred destination for global capital in 2019 and the political uncertainty isn’t driving international investors away but rather investors are taking a longer-term view. “Throughout 2017 and 2018, investment volumes surprised on the upside and the UK has maintained its resilience”, comments Alistair Meadows, JLL’s Head of UK Capital Markets.
A report concluded by the Royal Institution of Chartered Surveyors (RICS) on the forecast for Residential Housing in the UK does not expect to see too much change in the UK property market for 2019 and anticipates rental growth to accelerate marginally as a result of the shortage of homes to rent. The main problem facing the UK market is the lack of supply relative to the rise in population. This growing demand for housing will continue to support house price growth in the medium to long term (JLL UK Market Report, 2019).
UK Property Market Predictions:
JLL estimates property prices across the UK to grow by 11.4 percent in the next five years, provided a deal with the EU is reached. Additionally, Savills has an optimistic view and is forecasting that UK property prices will rise 14.8 percent from 2019-2023, though there will be substantial regional disparity. RICS has a more conservative outlook and predict that prices will grow by one percent in 2019, although surveyors believe that uncertainty around Brexit is likely to impact the UK property market well into next year. Cluttons, the London-based firm of chartered surveyors and property consultants, has a less optimistic view and expects the London residential property market to fall a further 10 percent before prices start to improve in a year to 18 months’ time.
Bath Property Market Performance:
Despite the political uncertainty in the wider UK market, properties in Bath continue to experience robust, positive capital growth. This resilient performance is fuelled by a number of factors, among them: the influx of Londoners fleeing the high housing prices, the growing demand for student housing in the area, and the emerging Airbnb trend offering investors attractive returns. In particular, apartments ranging from £250k to £400k continue to outperform the more expensive investment options as investors are seeking to secure smaller, high quality apartments in prime locations within the elegant landscape of Bath.
As one can see from the various UK property market predictions stated previously, it’s difficult to forecast the outcome of Brexit and the UK’s future relationship with the EU, which makes understanding the effect it will have even more challenging. Figure 1 below illustrates the various possible outcomes of Brexit depending on the circumstances under which it will occur. However, no one definitively knows what the outcome of Brexit is going to be and only time will tell. Nevertheless, properties in Bath offer a robust income-producing investment during this uncertain time. The UK market offers an opportunity for patient investors to take advantage of sellers needing capital who are open to accepting lower price offers from buyers where this uncertainty exists.
Figure 1: Property downturns compared: will Brexit trigger another one?
In our view money supply and interest rate accommodation by the Bank of England will be timed to support the market ensuring that property prices outside of London, which has experienced bubble-like growth during the 10 years to 2015, will probably be fairly stable with growth resulting from a shortage in supply. We expect the £200k – £400k Bath City areas to continue to outperform.
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