Adding to one’s portfolio of investments with real property, whether as a residential home or a buy-to-let investment, has long been a sound financial choice. However, the recent turmoil plaguing the UK has made potential buyers in the real estate market more tepid than ever. Turbulence in the form of politic unrest and uncertainty, changing markets, and worries over the future of the UK economy create challenges in knowing when investing in real estate is the right move.
Over the last several years, the property market in London has been under fire. According to a high-end agency focused on Mayfair properties for sale, prices have continually dropped, particularly in luxury markets, but that does not necessarily indicate now is a grave time for sellers. In fact, the shifting tides of the London property market lay the foundation for a healthy return of real estate investment opportunities.
The UK Property Market
Within the previous year, real estate in and around London has experienced a rollercoaster of movement. Home prices have fallen in nearly all price ranges and neighbourhoods, mostly correlated to the uncertainty of major economic shifts including Brexit. Although these worries are uncomfortable at best, the property market is in a constant state of flux regardless of what may be happening out in the world. With that as the reality, it is essential to view investment in real estate not from the perspective of the current state of the union, but instead, the real data that is driving trends in housing.
Year over year, prices for London properties have been lower by an average of four per cent – not far off the historical figures of years past with similar uncertainty surrounding economic shifts. Similarly, purchases of property have been down, reaching their lowest point in nearly ten year’s time. However, prices have started to come back up in recent months, indicated a change is on the horizon. As it stands now, the London real estate market is poised for a rebound in the years to come, making now an exciting time to invest in a property in which to reside or to ultimately let out.
A Nod to Buyers
The increase in property values over the short-term is a clear nod to buyers in the housing market in and around London. A combination of high-quality properties and increased inventory of available homes, across most price range markets in the area, means that buyers may have the upper hand in negotiating purchase deals.
Currently, there is an estimated 50 per cent greater amount of property available compared to the last several years, and price reductions are a constant, particularly in luxury markets. Sellers are ready to move on, and buyers can take hold of that opportunity. These factors married with repressed prices create an environment where buyers can have their pick of a housing investment that not only fits their budget, but is positioned for growth over the next several years.
A Long-term Investment
Answering the question of whether now is the right time to invest in real estate in London or throughout the UK is not always straightforward. The driving forces behind market movements added to the current state of affairs create some trepidation among those who are otherwise qualified and ready to purchase. However, the most significant consideration should not be these newsworthy topics, but instead, the calculation of what a long-term investment in property may return over time. Real estate is meant to be held for several years, and those who are willing and able to do so can benefit from the current market environment.
Given the price reductions seen across the board, and the recent turn in the market toward property value increases, buyers are positioned well to make an investment in real estate. It is, however, important to give thought to how purchasing property impacts other facets of life, including cash flow and the opportunity cost of investing in other avenues. After weighing the benefits and drawbacks of real estate investment compared to alternatives, potential buyers can make a decision that is best-suited for their immediate and long-term financial needs.