Property investment is well known to be a highly secure investment. The saying “safe as houses” exists for a reason, in the past there has been little doubt about the security of property investments.
However, now more than ever we are beginning to see signs of uncertainty in the market. With the ambiguity surrounding Brexit and the tightening of lending rules being enforced, it is possible that we are seeing a ‘tipping point’ in the market.
There has been a trend in the buy-to-let sector, much like HMO Property, that has actually been going on for some time now, even before the uncertainty of Brexit, this being a steady decline in foreign landlords. Hamptons International highlight that lettings accounted for by foreign landlords have halved over the past eight years.
In fact, it looks likely to be a combination of events. On top of Brexit, the UK also faces decreasing house price growth, tougher tax regimes from April 2019 onward, and a higher stamp duty.
This fall in overseas investment is most evident in the capital. Active overseas Landlords were down from 26% in 2010 to 10.5% in 2018, a significant drop for such a short period. It’s not all bad news for London though, certain London boroughs have seen growth.
Overseas investors are still targeting exclusive areas in the capital, with more than half of the properties in exclusive areas being purchased by overseas investors, spurred on by the rise in Middle Eastern investors.
Investors targeting the North
Buy-to-let aside, overseas investment in UK property is still strong. In 2016, the same year as the Brexit vote, the UK received a record high foreign direct investment of £145.6B. The UK also boasted 14% of global commercial property investment total.
The North is seeing high economic growth. Coming as a result of low-interest rates and the fall in value of Sterling and indeed property, foreign investors are finding UK property attractive.
This has a positive knock-on effect for the area. With an increase in jobs and demand for people to move to the area, the rise of Northern cities such as Manchester and Liverpool are significant.
Regional city success
Manchester is actually one of Europe’s fastest growing cities. Properties are still significantly lower than in the UK capital, combined with the ongoing construction of the HS2 and increasing employment opportunities, Manchester is fast becoming an attractive destination, not just for migration but also for investment.
Asian investors in particular have targeted the city as an attractive destination due to this reduced price, and also for the economic growth in the area. Boasted as one of the top cities for foreign direct investment (FDI), price growth in Manchester was higher than anywhere else in the UK.
Similar to Manchester, Liverpool is also seeing major economic growth. With house prices rising by 5.3% in 2018, the rise in interest from Chinese investors is also significantly up in the city.
What the future holds
Although the effect of Brexit is having a negative effect in many ways, the positive is that it is having little effect on FDI, actually increasing the attractiveness of UK property. Additionally, a hard Brexit may actually further encourage FDI, with the bank of England predicting that prices could drop by up to 35% from a ´pre-Brexit´ level.
The main thing to consider is that the UK comprises of many high and low growth areas. Although we have seen an overall fall in FDI in London, we are seeing a substantial rise outside of the capital. This is supported by findings from Knight Frank, whom show that the UK is one of the most attractive places to invest in, almost entirely due to the fall in value of sterling.