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Why the UK remained popular for investors during the pandemic?

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Whether you are an investor or buying for your own use, the UK is still considered one of the favourites and popular European countries for property investment and migration. Even with the current pandemic, the property market in the UK, in fact, still reacted positively.

According to the UK House Price Index - a National Statistic that shows changes in the value of residential properties in England, Scotland, Wales and Northern Ireland, the average house prices in the UK increased by 10% in the year to May 2021.

Why is it popular? Well, here are a few reasons:

1. Stability

2. Population

3. Demand for Housing

4. Return Yield

5. Low-interest rate

6. Stamp Duty Holiday

 

⏺ Whether Brexit or COVID-19, the overall UK economy for past track record is still relatively stable. The economy has rebounded slowly despite the current Covid restriction. Moreover, London is the best city in the world in terms of economy, research development, cultural interaction, liveability, environment and accessibility, according to the Global Power City Index 2021. London was also voted as the world best city in 2021 by Real estate advisor Resonance Consultancy. The 2020 Global Real Estate Transparency Index by JLL named the UK the "most transparent market globally" - ensuring many investors to still find it safe to invest in the UK.

⏺ According to the World population review, the UK population is around 68mil, and with the projection, its population will exceed 75 million in 2060. Not forgetting the overseas migration also contributed the major part of the population, especially with the influx of BNO passport holders from Hong Kong. More people living and moving to the UK will increase the demand for housing, and certainly, it will drive up the property price shortly.

⏺ During this pandemic with lockdown and movement restriction, most people are now changing their work patterns or studying from home. Hence, many people are looking for bigger spaces or rooms to accommodate their activities and needs, not forgetting those migrants with families. According to Zoopla, a popular UK real estate website, the demand for houses has been doubled; average house prices have been up by 30% since the market peak in 2007.

⏺ The latest data shows that tenant demand is remaining at high levels across the UK. With such strong demand, the rents have been increased in some locations, and the time it takes landlords to let property has decreased. Also, due to lack of supply, the first time, over half of the rental homes were left within a week. You will be surprised if you compare cities outside of London; rental growth hit double-digit figures for the first time on record. If continuous undersupply and rising demand, including a surge in migration, long-term forecasts for rental prices are extremely positive, especially for those looking to invest in UK property. By 2025, JLL predicts that the average rental prices for a UK investment could rise by 8.5%.

Ask yourself should you invest now or later?

⏺ With the current Bank of England Base Rate at a historic low of 0.1%, many lenders are willing to offer very competitive Buy-to-Let mortgage rates, making the entire investment much more attractive and viable. The SDLT holiday was introduced to help boost the property market during the pandemic. The extended stamp duty holiday means no tax will be paid on the first £500,000 of property purchases in England and Northern Ireland until 30 June 2021. However, the chancellor has provided an extension with a reduced threshold of £250,000 until the end of September 2021.  After this date, the exemption will return to the old level of £125,000. This meant a saving of up to £15,000 for homebuyers. Hence a lot of buyers are taking advantage of this valuable incentive.

⏺ Landlords and second-home buyers have also taken advantage of the holiday, although they have still needed to pay the 3% surcharge which applied under the old rules. However, an SDLT surcharge of 2% has been imposed for non-UK residents since April 2021.

Stamp Duty Land Tax Rates

Pre 30 June 2021 Rates from 1 July to 30 September

Standard rates from 1 Oct 2021

Up to £125,000 0% 0% 0%
£125,001 - £250,000 0% 0% 2%
£500,001 - £925,000      5% (first £500,000 exempt)   5% (first £250,000 exempt) 5%

 

 

Please tune in next time as we share where are the investment hotspot in the UK.

This article was written by Mandy Chen.

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