When considering a property investment in the UK, it is essential to have an understanding of the economic factors and statistics that are behind today’s figures.
Despite the pressures of the “Credit Crunch”, shrewd investors in UK property are still able to achieve returns on investment. But today, location is more important than ever: prime investment areas of the UK are generally to be found in Central and Greater London, the South East, the South West, the West Midlands and parts of Scotland. Meanwhile, property markets worst hit by the economic crisis are those in Northern Ireland, Wales, Yorkshire and the Humber, the North West and East Anglia.
It is a well known fact that UK house prices in general are experiencing major downward pressure, in fact fetching on average 11% less than in 2007, according to the latest Halifax house price index. Halifax reports that UK house prices fell by 2.5% in March 2008. The biggest falls took place in the West Midlands (-5.0%) and Wales (-4.7%). Price drops were also prevalent in the South West (-2.6%), Northern Ireland (-1.5%), Yorkshire & the Humber (-0.5%) and the North West (-0.5%).
An extreme drop in market activity means lending conditions have been tightened and even fewer buyers can now afford to purchase property. Repossessions are up by 24% compared with 2007 figures, and some investors willing to sit and wait for long term capital returns, perhaps combined with buy-to-let investment returns, are seizing a good opportunity to purchase now at hugely reduced prices. These investors rely on the fact that many areas of the UK have a solid local labour market and a shortage of homes continues to support the market.
In 2007, annual capital growth was 6.9%, compared with 3.8% in England and 1.5% in Wales, according to the latest survey from the Department for Communities and Local Government (DCLG). It is interesting to note that today property in Scotland still defies national trends, with average prices actually having risen by 9.3%. As a result, the average home now costs £172,185, according to the latest Lloyds TSB House Price Monitor. Main areas for growth include the north (excluding Aberdeen), Dundee and Edinburgh. Conversely, the number of real estate purchase transactions in Scotland has fallen by 27% since the same period in 2007, echoing a general slowdown in the wider market.
According to The Halifax, compared with Greater London, house prices in Wales are 1.9 times lower than those in Wales. The average house price in Wales is £165,472 - 17% lower than the UK average of £198,898. Favoured Welsh locations are in South Wales, particularly in and around the city of Cardiff. Nevertheless, RICS reports that if the recent trend in house prices continues, growth could reach its lowest level in Wales since 2000; indeed, Halifax predicts a growth rate of 0% for 2008.
Northern Ireland saw the highest annual house price growth in the UK during 2007, at 24.2% (£120 a day). After this rapid rise, the Northern Ireland property market in 2008 is dropping just as fast, according to the financial group, Bloomberg who confirm that house prices in Northern Ireland are collapsing almost five times faster than in the rest of the UK. As in all property markets throughout the UK, this is great news for long-term investors in Northern Ireland. Many investors are making the most of the hugely reduced prices a distressed sales market provides, while they are ready and willing to wait for as long as it takes for the market to revive to retrieve itself from current levels.
The UK economy has of course slowed sharply but government figures still indicate that growth is expected to achieve its predicted 2.5% growth by next year. The UK is generally regarded as a strong and reliable economy in which to invest. A highly industrialised nation with the sixth largest GDP in the world, the UK is a strong economic global player. However, the recent volatility of the Stock Market and uncertainty surrounding the financial markets could potentially have an impact on growth if the situation persists.
Reasons why the United Kingdom is an intelligent property investment location:
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