The Investec/BVCA Guide to Property Investment in England and Wales

This report, created as a partnership between Investec and the British Venture Capital Association (BVCA), is designed to give a bird’s-eye view of how different property asset classes are performing and the macro trends shaping the investment landscape.

 

If you’d like to read the full report on property investment in England and Wales, just click on the button below. Or, if you’ve only got a few minutes to spare, we’ve provided a short summary of the key findings below.

deborah-Sayagh
Property opportunities in England and Wales are evolving dynamically and they’re creating new opportunities for investors.

Deborah Sayagh

The property market in England and Wales has attracted global investors for many years – and with good reason.

While the uncertainty of the UK’s 2016 vote to leave the EU continues to play out, the long-term case for buying a home, investing in an office property, or buying a warehouse is supported by unparalleled access to global markets, strong investor protections and the potential to earn attractive returns.

 

The state of the market

Today, the UK’s well-established legal system, stable currency, growing population and limited land supply continue to provide a favourable backdrop for investors, whether they seek financial returns or just need a place to settle their families.

 

But behind the broad positives, there’s a nuanced picture. “It’s very much specific to individual markets, whether that is in prime London, wider London, or the wider UK,” says Peter Izard, business development manager for Investec Private Bank. “You can’t sweep it with a broad brush.

Prime residential property in London, for example, has struggled over the past four years, falling nearly 18% since the market peak in 2014, according to research by Savills. But during the same period, property prices in areas outside central London have been among the best performing across Britain.

 

Why there’s value to be found outside London

The recent performance of regional property has been a study in contrasts. Non-London residential prices have been steadily rising since April 2012. This trend has been most prevalent in the East and West Midlands: prices in Manchester and Birmingham have risen particularly strongly. But growth is also evident in the South West and North West of England and in Wales, according to the Royal Institution of Chartered Surveyors (RICS).

 

The most recent UK House Price Index from the Office of National Statistics shows that house prices across the UK have risen 3% on average in the year to May 2018, from an average 3.5% in the year to April, with the slowdown primarily attributed to a downturn in the South and East of the country.

 

It’s still the residential property market that holds the most interest for many investors, buoyed as it is by long-term supply and demand fundamentals that structurally support rising prices.

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You can profit if you plan

Property opportunities in England and Wales are evolving dynamically and they’re creating new opportunities for savvy individual investors. Asset appreciation assumptions, changes in the tax code, demographics and technology have shifted appetite for residential Buy to Let, while retail upheaval and geopolitical factors are shaping commercial property decisions.
If you’re ready to explore your opportunities in property investment further, these are just some of the factors you’ll need to consider:

Opportunities for property investment

  • Residential property values are rising in most parts of England and Wales,
  • The market should be bolstered by limited land availability amid growing populations.
  • Large-scale Build to Rent developments are a growing new area of the residential property market, promising reliable rental yields while meeting growing urban demand for rental accommodation.
  • Prime office occupancy levels are high in urban areas across England and Wales and could push rental yields higher.
  • Demand for office space outside London continues to support new development and conversions of industrial property.
  • Demand for warehousing and mixed-use space from SMEs, and last-mile delivery service providers, will support continued demand for high street and near-urban commercial property.

Market conditions to keep in mind

  • There’s significant local variation between different parts of the UK.
  • Accelerating economic activity will cause interest rates to rise further, making it more expensive to borrow for property investment.
  • Residential properties valued at more than £500,000 are subject to a progressive Stamp Duty that can make the investment less attractive.
  • Buy to Let property tax benefits are being phased out for individual investors. Longer-term, government policy points to further disincentives for individuals to invest in such properties.
  • Affordability issues will continue to drive local governments to accelerate planning applications and require provisioning for affordable housing in new Private Rental Sector residential developments.
  • Retail property provides a mixed picture of downsizing retailers, inflexible spaces and the growing impact of ecommerce on walk-in business.

Read the full report