An Opportunistic UK Property Market Ahead?

An Opportunistic UK Property Market Ahead?
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If you have been a parent who had to find accommodation in London or elsewhere in the UK in recent months, you would find the competition fierce and rents hitting all time high as demand far outstrips supply.

In London, the average asking rent has reached a record of £2,480 per month, while for inner London average rents surpassed £3,000 for the first time. And the prediction is that average asking rents will continue to rise by an estimated 5% this year.

Foreseeing the continuous rise in rental market amidst the tight supply, there has been an increase in enquiries from parents whose children will be furthering their studies or have started working in London. For overseas landlords, the extremely strong rental market and discounts in the weak currency also offered great timing to enter into the market.

In the current peculiar situation plagued by high inflation rates leading to multiple interest hikes and complex geopolitics, unemployment rates in the UK remains very low. The naysayers believe that the effects of the looming recession will drive house prices down significantly this year. Yet more believe that whilst transaction volumes will fall in 2023, the UK benefits from a diverse and international investor base. The constraints impacting some investors means opportunities for others.

Activity to drop but not dry up as demand outstrips supply

What drives house prices up or down is ultimately an outcome of supply and demand in the marketplace. The critical shortage of housing in London and in UK since 2004, needing 275,000 new homes every year until 2035 to balance the demand and supply, has compounded post pandemic, due to the prolonged construction and halted planning process, shortage of labourers and significant increase in material costs, widening the supply demand gap even more.

As an opportunistic investor, the fundamentals have never been stronger. Housing is a basic need and a proven asset to hold in the long term. The new and returning students internationally, as well as the ease of applying for a visa post studies to stay and work, coupled with professionals and new workers streaming into the capital to live and work, will keep demand holding extremely strong in a slow supply market.

The end of UK's Help-To-Buy scheme for first time buyers in the UK and higher borrowing costs will also restrict more homebuyers in the UK from the buying mode and remaining in the rental market for a longer time.

Moderate Price Correction Possibly But Not Crash

After the global financial crisis (GFC) in 2008, lending policies have been tightened significantly and the current UK housing market is built upon much stronger foundation, assuring investors that there will not be a GFC 2.0. Today, the UK property market is a much less leveraged market than in the GFC where over-lending and poor lending policies led to a crash of the economy.

With a strong employment market with unemployment rate at a low of 3.7%, there is also an absence of distress with the highest household incomes being recorded in decades. Factoring all these into play, the expectation is that there will be more motivated sellers (but not financially distressed) in the market to match with opportunistic buyers especially those who are cashed up. These buyers will be looking for more values to their dollar in not paying the asking price, and sellers will accept a fall but only to a certain level as they are unlikely to be distressed.

Low vacancy rate in London and continuous rental growth

Given that a balanced market offers a 5-7% vacancy rate, London, being UK's top global city holds a high occupancy rate of 98%, which means a 2% vacancy rate that translates to the fact that only 1 out of 50 houses are available for rent or purchase.

The forecast is an estimated 4% growth in rental this year and this continuous growth year on year will be expected until supply catches up. For overseas investors, this is welcoming news with improving yields on their investments.

Finding values in London real estate market today

The London real estate market is one of the most active and sought-after marketplace in the world with approximately 85% of Central London properties owned by foreigners already and with each economic crisis, the international ownership increases, demonstrating the capital city's ability to lure foreign direct investments.

In recent years, international investors have been driven to find investment hotspots within London with priority back to being close to good transportation such as tube and train stations, more heightened with all the transportation strikes happening throughout the UK in the last few months, bringing many tenants back to the capital as they seek to reduce the stress in commuting.

Investment Hotspot - Wembley

Wembley, an extremely well-connected and vibrant neighbourhood is one of the newest investment hotspot as well as being hugely popular amongst the locals in London.

Already having an established community with the iconic Wembley Stadium at the heart, living in Wembley and close to the tube stations will mean that one can get into Zone 1 in just 12 minutes, covered by Jubilee, Bakerloo and Metropolitan lines, on top of the London Overground and national rail service. Its superb connectivity is one of the key reasons safeguarding Wembley's property values and popularity among renters and home buyers, with the forecast that whilst activity may slow this year, Wembley's housing will remain stable and emerge stronger from the period of uncertainty.

Wembley has a good population of students renowned for the livability and convenience as well as having direct and convenient train access to London's best education institutions. UCL, Imperial College London, London School of Economics and King's College London are all accessible easily.

Wembley's latest project - Fulton & Fifth by Regal London

Since 2002, public infrastructure improvements and more than £2.5 billion of private investment have transformed Wembley, making it one of UK's largest and most successful regeneration program.

Fulton & Fifth is the newest opportunity that sits at the heart of Wembley, where buyers are given a rare opportunity to either invest or live in one of London's most exciting and fastest growing neighbourhoods. Residences at Fulton & Fifth come with the highest quality of design and access to outstanding amenities that put well-being first, including a yoga studio, swimming pool and golf simulator - typically exclusive to super-prime developments and 5-star hotels.

Launching for the first time in Malaysia and at phase 1 of the development, Malaysian buyers will be able to benefit from the future capital appreciation as the area and project develop further.

Set alongside the Wealdstone Brook in Wembley Park, the development forms part of Brent's plans for a Green Corridor. The area is set to be transformed with new green spaces at Fulton & Fifth and beyond, including Wembley's first new public park in 150 years to give the site a significant uplift of more than 200% in area-based biodiversity value. The residences are delivered alongside independent cafes, shops and workspaces, and is due to complete in Q1 2025.

Fulton & Fifth is designed to a high-end specification and is equipped with amenities often only seen in top end developments. The cost of providing all these amenities comes at a surprisingly low service charge, which translate to a higher net rental income for investors and a very reasonable fee for owner-occupiers to live in a safe and quality building.

Fulton & Fifth will be launched exclusively by Red Bean Consultancy (RBC) on 11th & 12th February (Sat & Sun) at Mandarin Oriental Hotel. To get your latest London Property Update Q1 2023 and to register for the event, please contact Ms Shelvin Tan at 012-2857618. Prices at Fulton & Fifth starts from £435,000.