UK Property Market Remains Resilient Despite Economic Challenges
This article provides a quick overview of the current trends in the UK property market. Highlighted are the following: – Demand for UK homes is above expectations. – Growth is slowing, but not as quickly as many had expected. – Pent-up demand from overseas buyers will return in 2022.
Demand for UK homes exceeds expectations
Despite the recent economic challenges, demand for UK homes continues to surpass most expectations. The Halifax, the UK’s biggest lender, reported that the average house price in August jumped by 0.7%, or PS2,587. The rise was considered modest by some observers, but it is still above the recent trend of house price inflation.
Growth slowing less than expected
The UK property market remains resilient despite economic and political challenges. While the pound has plummeted to record lows, the cost of living has rocketed and tax changes have increased the burden on households, the property market has remained remarkably resilient. The latest home price index, published by Rightmove on Monday, shows that the average price of homes coming to market is up 0.7%. This suggests that the property market is well-positioned to continue growing.
Offshore corporate vehicles used to hold UK property
Offshore corporate vehicles are often used to hold UK property. These companies are formed for specific purposes and often incorporate for each new property. The offshore companies act as the legal owners of the property. The main benefit of using an offshore corporate vehicle is that its owner is not subject to UK taxation.
Long-term structural issues
There are a number of structural problems with the UK property market. One is the financialisation of the housing market, which began in the 1980s. This financialisation shifted the economy’s focus from producing goods and services towards investing in property. It has also led to problems of gentrification and financial instability.
Attractiveness of prime central London properties
Although the recent financial crisis and lockdowns have caused a global economic slowdown, London has seen a rebound in its property market, attracting international investors. The capital’s properties are expected to continue seeing positive capital growth in the coming years. Knight Frank, a real estate consultancy, has forecast house prices in prime outer London to increase between 4% and 5% per year over the next five years. Prices are also expected to rise almost 4% in 2017.
Price growth above average over five years
The strongest regions for price growth over the past five years were the East Midlands, East Anglia and Wales. The South East and Outer South East saw the slowest increases. Despite the slowing economic growth, these regions are expected to grow their prices at above average rates over the next five years. However, the price increases in these regions will slow as more interest rates rise.