This year is primed to be a seminal one for property, with the private rented sector building further momentum and regional cities across the UK stealing the limelight (and highest yields) from London.
What can we expect from 2016?
According to Select Property Group, there is no expectation that supply will even come close to fulfilling demand as we enter 2016, resulting in projected average house prices increases of £17,000 nationwide. Following a £20,000 increase in 2015 this demonstrates the ongoing value in the UK property market. In certain regions there will be exceptions and the stable growth will be good news for investors. In the first quarter of 2016 there will be a phenomenal uptake in purchases, with those looking to buy before the new stamp duty that comes into effect in April. Stamp duty will affect the London property market hardest, which will further expedite the outflow of capital from London to the regions.
How is London expected to fare this year?
London hasn’t been the ideal locale for investors to purchase property for a while, and in 2016 this is set to continue. Increasing house prices and corresponding taxes will eat away at yields, leaving little value left in the capital. Returns from prime London locations, such as Kensington and Chelsea, currently stand at 2.7% but 2016 could see them fall dangerously close to a disappointing 2%. That’s not to say the UK will slip into a property purgatory – far from it, with investors instead finding value across regional cities.
Where should investors look for great value and opportunities in the UK market?
Purpose-built opportunities that cater to a specific demographic, from students to young professionals, will increasingly evolve and become more refined in 2016. By taking into account the needs of the respective demographic, purpose-built accommodation will offer a product that appeals to tenants far beyond any other in the private rented sector and directly targets their specific needs. By assuring premium quality compared to other rental properties on the market, purpose-built accommodation will attract consistently high demand, which in turn will equal sustainably high yields.
Is there a particular city standout?
Strong jobs markets found in cities such as Manchester will attract both young professionals and businesses northward. It is no coincidence that the northern city boasted both the highest yields (>7%) and fastest job growth in the whole UK in 2015, offering investors exceptional value that will only increase in 2016 and for the coming decade. Government-backed long-term plans revolving around the Northern Powerhouse will encourage the economy and improve connectivity with other major UK cities, leaving Manchester primed to begin a prolonged and profitable growth curve.
How will the private rented sector evolve in 2016?
The private rented sector will increase in popularity as flexibility continues to be an invaluable asset to a generation of young professionals who don’t view homeownership as a priority. More than 1 in 5 properties will be part of the PRS by the end of the year, a trend that will define the next decade. As the PRS continues to grow it will be home to increasingly diverse demographics, with a growing number choosing to see renting as a lifestyle, reflected in the average length of a tenancy increasing to over two years.