Property is a major part of the British economy. The total value of all the country’s real estate property is more than £6.4 trillion. That’s 21% of the country’s wealth. The property industry contributes £94 billion a year to the British economy.
There are a number of forms for property investment. The classic method is buy-to-let property. You buy a home, let it out and collect rental income. If you’re sure this is how you want to invest, read our buy-to-let investment guide.
You can also invest in collective and crowdfunded property funds, commercial property and by buying and selling houses – also known as house flipping.
The UK housing market is growing – but the rate of growth is decreasing.
The economic strength of the housing market is typically measured by two factors: house prices and rental prices.
House prices have increased every year since 2012. As of March 2019, the average house price in the UK is £227,000 – reported by the Office for National Statistics. It’s increased by 1.4% (£3000) in the last year.
The rate of growth for house prices has slowed down over the past three years. In the previous 12 months, from March 2017 to March 2018, the average house price grew by 4%.
House prices fell by 1.9% in London from March 2018 to March 2019. However, London remains the most expensive region in the UK by average house prices.
Other regions of the UK have grown much more in the past year. In the year up to March 2019, house prices increased by 3.6% in Yorkshire, and 3.4% in the West Midlands.
However, you should refer to more localised data by town or postcode before buying.
Regional Average House Prices, March 2019 and change in previous 12 months
- London: £463,000, 1.9% fall
- North East: £123,046, -0.8
- North West: 159,471, 2.5
- Yorkshire and the Humber: 162,129, 3.6
- East Midlands: 190,171, 2.9
- West Midlands 196 571, 3.4
- East: 286,611, 0%
- South East 318 491, -0.4
- South West: 253,652, 0.3
- Scotland: 149, 461; 3.3
- Wales: 158, 696; 3.0%
- Northern Ireland: 134, 811; 3.5%
Rental Market Growth
Rental prices and rental yields are another key indicator of how well your property investment will perform.
Rents for residential properties have been increasing every year. But like house prices, their rate of increase is slowing down.
The average rent for a UK home is now £1,217 per month, according to figures from mortgage platform Landbay. This figure has increased by 0.96% in the year up to March 2019.
In London, the average rent is £1,903 per month – an increase of 0.57% in the year up to March 2019.
Other areas in the UK are seeing much more rapid rental growth:
- Edinburgh: 5.97% (£1,106 pm)
- Nottingham: 4.28% (£695 pm)
- Stirling: 3.26% (£796 pm)
Buy to Let Properties
Buy-to-let homes are the classic method of property investment. Although many landlords are facing diminished returns following recent tax reforms, buy-to-let properties remain a very popular investment option.
- Privately rented (buy-to-let) residential properties have a total value of £1,110 billion
- They make up 19% of the value of the UK’s total housing stock
- Residential property has increased by 7% in the last ten years (measured by floor space)
- 80% of long term residential tenancies are ASTs. 20% are HMOs.
- 4.5 million properties are buy-to-lets. That’s 21% of residential properties in the UK
- The number of households renting privately has increased by 25% since 2010
- 1.6 million private tenants (more than a third of private tenants) are families with children
- 45% own just one buy-to-let property. These properties make up 21% of the private rental market.
- 55% have two or more properties to let. 79% of buy-to-let properties are owned by portfolio landlords.
- More and more landlords are buying multiple properties. In 2010, only 19% of landlords had more than one buy-to-let property. This figure now stands at 55%.
Short Term Lets
Demand for short term rentals in the UK is growing dramatically. Demand for rental properties for holiday lets is particularly high.
The typical Airbnb host…
- Earns about £3,100 a year
- Rents their property out for 36 nights a year
Over the last year…
- Airbnb hosts earned a total of £854 million
- Airbnb had 8.4 million guests across the UK
- That’s an increase of 80%
- Guests in Northern Ireland increased by 144%
- Guests in the East Midlands increased by 134%
Collective Funds and Crowdfunding
If you haven’t saved enough for a deposit for your own buy-to-let, you can still invest in property through Reits, P2P and crowdfunding strategies.
Property investment makes up:
- 27% of equity crowdfunding
- 41% of peer-to-peer lending
Real Estate Investment Trusts, also known as Reits, are an equity investment method. You buy shares in a company that owns property.
- 90% of a REIT’s annual income is paid to shareholders as dividends
- 51 Reits companies trade on the London Stock Exchange
- REITs shares can be held in ISAs and CTFs to receive tax exemptions on dividend payments
- The UK’s commercial property is worth £833 billion
- Investors own 55% of this – £486 billion
- It makes up 13% of the UK’s total property stock, by value
- And about 10% of the UK’s net wealth
- Industrial properties are increasing in market value
- Offices and retail properties are decreasing in market value
London vs the rest of the UK
- Commercial property in London is worth £334 billion
- That’s 38% of the UK’s total commercial property (measured by market value)
- London property values have almost doubled since 2004
- Property values outside London have only increased by 10% since 2004
Commercial property rents
- Businesses spend a total of £19 billion a year renting office space
- And £20 billion a year renting retail space
- Office rents increased by 1.9% from 2006 to 2016
- Retail space rents fell by 0.2% from 2006 to 2016
- The average lease length is now 7 years
- 31% of the UK’s commercial property is owned by reits, crowdfunded and collective investment schemes
- Overseas investors own 29%
- Insurance companies and pension funds own 16%
- Private individuals own 15%