Despite some ferocious exchanges between the UK government and their EU counterparts there is a growing belief that the UK property market is “bottoming out”. While there is no doubt we have seen a reduction in demand and a reduction in prices in some areas of the country, many people will be surprised to learn that the professional community believes the worst may be over. It has to be said that over the last few weeks we have seen indications that the market is steadying but why are real estate agents more confident than ever that the market is bottoming out?
Overseas investors
The UK market has always attracted more than its fair share of overseas investors although concerns regarding Brexit and the short to medium term performance of the UK economy did see this number reduce over the last 12 months. Those within the real estate sector were always confident that 2017 would be a turning point for the UK market and it does seem as though this is starting to emerge. There has been a distinct increase in overseas investors over the last couple of months and while it is dangerous to take any short-term change in trend as gospel, the signs are certainly encouraging.
It is debatable as to why overseas investors are now starting to look at the UK again but perhaps the small recovery in the UK currency (although there may be more turbulence to follow) has prompted some overseas investors to take advantage of the fall in exchange rates over the last 12 months.
Froth taken off the market
Area such as the London market have always had an element of “froth” on market prices because of the demand for homes and the often unique opportunities available. Those looking longer term will instantly recognise that the recent consolidation of property prices has increased rental yields which now offer extremely strong long-term income opportunities. This despite the fact that the UK government seems determined to tax buy to let and property investors to the hilt in the short term to make up for income shortfalls elsewhere.
It was also interesting to see that over the last six months or so some of the more benign market in the UK, such as the north-east and north-west, seem to have sprung into life. At this moment in time there is less of an emphasis on the London property market and investors do seem to be casting their net wider to find attractive prices and in some cases double-digit rental yields. That is not to say that investors will not return to the London market in due course, indeed there are also signs of a bottoming out here, but if anything it has prompted some investors to cast their net wider.
Conclusion
It is interesting to see that UK property prices seem to be “bottoming out” despite the recent ferocious exchanges between the UK government and their EU counterparts regarding Brexit negotiations. Recent briefings about private conversations and meetings with the UK government by the EU have not gone down well and have certainly poisoned the atmosphere in the short term. Will the UK be forced to walk away from a potential EU trade deal in the short term?