Given the capital appreciation, and rental yield expansion, seen over the last decade (and especially the last two years) the UK property sector is increasingly being pursued from an entrepreneurial lens by buyers. High demand, relative to supply; low availability of housing stock; and the health of the national economy are some of the key drivers underpinning this behaviour.
UK home prices have set record highs of late with the Office for Budget Responsibility (OBR) estimating the current average at £354,563. This represents an 18 per cent increase over the last two years, approximately £44,000 on average, according to Halifax data. Moreover, lettings income appreciation is also up 10.2 per cent over the last year to February.
These trends are supported by a healthy economy with Bank of England statistics revealing mortgage approvals exceeded pre-pandemic levels by 8 per cent in February. Furthermore, OBR research suggests average yearly household incomes for upper, middle, and lower class (ABC1) groups have risen to £31,772 on average in 2021, from £5,720 in 1985. And at the top end of the market consultancy TwentyCi has observed double the agreed sales on £1m homes relative to pre-pandemic levels.
This has created fertile ground for entrepreneurially minded individuals, investors, collectives, and institutions to put their capital to work in UK real estate. This is creating solutions for the dearth of supply in housing inventory by accelerating construction, off-plan sales and thereby development, as well as creating long term income streams through developing and buy-to-let.
As such it is estimated that over one in ten UK adults own a second home that generates income, growing over 30 per cent over the last two decades according to Resolution Foundation research. With Zoopla reporting that real estate stock levels are 42 per cent below five-year averages, there is significant upside potential for new stock that comes on to the market in this macroeconomic landscape.
“It’s always been seen that pension money, Isa investments and speculators turn to stock markets as their instrument of choice, however Britain’s housing market is inarguably a better bet currently as a means of providing better appreciation and returns on investors’ cash.”