Following three sluggish years since the 2016 Brexit referendum, the UK’s property market is being tipped to spring back to life in 2020. Both buyers and sellers, particularly the latter, have been sitting on their hands, waiting for some clarity on how Brexit will play out. December’s general election and the resultant strong majority won by the Tories has provided that.
Brexit is going ahead. Barring a major U-turn on the Conservative Party’s election manifesto, the north of England is also set for major infrastructure and development investment – further boosting its credentials as having overtaken London and the south east in terms of expected returns on property investments over coming years.
However, despite the fact that property market is expected to liven up this year, expectations of a boom should be tempered. It might be another several months, and progress made towards a positive UK-EU trade deal, before real confidence returns to the market.
But exactly those several months could be the window of opportunity for investors keen to snap up properties at more attractive prices, or on more attractive terms, before the competition heats up again. Buy-to-let mortgages are also currently offering some of the best terms ever. That offers the opportunity for existing investment properties to be re-financed on better terms, as well as acquiring new additions on an attractive mortgage.
Will Property Prices Rise Over 2020?
Almost all market observers and analysts are forecasting at least some level of price growth across average UK property prices. The National Institute For Economic and Social Research is particularly optimistic, forecasting a rise of as much as 4.5%. At the opposite end of the scale, London estate agents Chestertons are the most negative of a poll published in The Times newspaper, predicting prices to drop by 1% this year. Consultants Savills and JLS both think average prices will rise by 1% across the UK and the consensus seems to be for growth somewhere between 1% and 3%.
But plenty of regional variation, a theme of the past few years, is expected again. London and the south east are tipped for another year of sluggish growth, with big cities and urban areas in the midlands and north of the country expected to fare best.
These areas are still largely playing catch up with regions further south, which saw rapid price rises over the several years after the international financial crisis. That has left them with more room for growth, with many regions further north still to recover to, or sitting around, pre-crisis highs. In the south, many property market and economic analysts believe prices are already at or near to the affordability ceiling. If that proves to be the case, it will take a period of sustained economic growth and real wage rises before much more positive price movement will be possible.
For those casting their glance across the country for investment properties offering the best return prospects, what are the experts forecasting for the different UK regions? We’ll start with London and the south east and work our way north.
London Property Market 2020
London-based investment properties have seen their price growth lag the rest of the country for most of the last two years. 2020 is not expected to prove much better for the capital, though there are certainly areas within the city that could do much better than the whole.
Central London prime property prices have been particularly hard hit over the past couple of years, after previously surging to record highs. Stamp duty increases for second homes and non-residents hit demand but the worry a Labour party with Jeremy Corbyn at the helm might take power was arguably the greater drag on prices. Brexit generally didn’t help, putting off potential wealthy European buyers.
Now that the Conservatives hold their strongest parliamentary majority since the 90s, Labour look in disarray and a degree of Brexit uncertainty has been removed, estate agents Knight Frank expect prime London property prices to start moving up again. The company’s analysts forecast price rises of 18% over the next five years for prime property in central areas and 13% for ‘prime outer London’.
One area of central London that might be particularly worth looking at is Bayswater, where a major regeneration project is reinvigorating run-down zones. Despite neighbouring exclusive neighbourhoods like Notting Hill and Marlybone, Bayswater property prices have always failed to reach anywhere near the same heights. Samuel McArdle, director of buying agency Sterling Private Office, thinks regeneration is poised to give Bayswater a shot in the arm. He is quoted as commenting:
“With several high-profile developments underway, we have seen interest growing steadily as investors look to capitalise. Prices are expected to climb dramatically over five to ten years.”
The other areas of London where property prices are tipped to rise and might be worth looking at for investment properties are also less salubrious than the prime neighbourhoods the capital’s housing market is often associated with. Those where regeneration projects are either planned or already underway should be a focus.
One example is Brentford, where residential properties sell for considerably less than adjoining towns such as Richmond-upon-Thames, Chiswick and Barnes. Selling prices in Brentford were the lowest of any west London postcode bordering the Thames over 2020, leaving room for growth. Whitechapel in east London is another more rundown London neighbourhood expected to flourish, benefitting from the new Elizabeth Line station that will hugely improve its connectivity with central and other parts of London.
South East Property Market 2020
Are there any parts of the south east that have been overlooked by more well-heeled property buyers until now and could still see significant price rises in coming years, making 2020 the ideal time to snap up investment properties?
Milton Keynes and Bedford to the north of London are considered to still be affordable enough that they have room for property price growth. The prospects of both towns could also be boosted by the proposed new ‘Oxford-Cambridge Arc’ of new road and rail links between the two university towns.
A major part of that proposal would be the construction of a million new homes between the two. Both Milton Keynes and Bedford would be expected to host a share of those new residential zones. While that would increase the property supply, it would also improve the attractiveness of towns and new developments within the ‘Arc’.
To the north east of London, Norfolk isn’t always considered part of the ‘south east’ but we will include it here in a ‘greater south east’. Norwich property prices have performed very well over the past five years, up around 37%, and solid growth is expected to continue, with prices forecast to rise another 14% over the next five years. According to Richard Aldous of Savills, Norwich, the most prospective parts of the town to look for investment properties in are:
“The area between the A11 and A47 to the west of the city is full of pretty terraced houses around the old Norfolk and Norwich hospital. It’s a prime bit of city, but still has room for growth.”
He also mentions Canary Quay, Duke Street, St Benedicts Street and the Anglia Square scheme outside the ring road as Norwich locations worth consideration due to better than average prospects for price rises.
Commuter Belt Property Market 2020
Towns close enough to London for those working in the capital to commute from are sometimes considered their own property market ‘region’. Of those, Luton could be an interesting prospect for investment properties due to its location in the centre of the ‘Cambridge-London-Oxford’ triangle and a huge £1.5 billion regeneration programme.
Strawberry Star Group chairman Santhosh Gowda expects Luton rental yields to show around 6% annual growth for the next 3 years. The property developer is building 877 new flats, plus a hotel, in close proximity to the Luton Airport Parkway station. It’s a 30-minute train journey from the station into Kings Cross in central London.
Another commuter town on the up is Slough. It’s got something of a bleak reputation thanks to Ricky Gervais’s The Office but regeneration is underway. House builder Berkeley is building 1300 new properties on the site of the old Horlicks factory and the Thames Valley University site will also be regenerated by the £650 million North West Quadrant development. A new high speed rail link to Heathrow has also been proposed and is at the planning stage.
The Midlands Property Market 2020
Birmingham, England’s second largest city, has been one of the best locations for property investments for a few years now due to rising prices and strong rental returns. Another 18.2% price growth is predicted for the next half decade, with rents expected to increase by 19% over the same period.
The city’s Jewellery Quarter and Digbeth neighbourhood are tipped as among the most hopeful regions. Digbeth, just off the city centre, is tipped to develop in similar way to Hackney has in London over the last couple of decades. The neighbourhood used to be very rough-around-the-edges but is becoming Birmingham’s hipster central, with creative businesses, art galleries, restaurants and markets popping up like mushrooms. It’s also just 5 minutes from the proposed HS2 station and 15 from the main New Street station and fast rail connections to London.
The Wales Property Market 2020
Nationwide Building Society data showed Wales as having the strongest property price growth in the UK over 2019. That reflected the general trend of cheaper areas with greater affordability wiggle room showing the best growth over the past 2-3 years. And property price growth in Wales is expected to continue in a positive direction with around an 18% increase over the next five years.
Cardiff and surrounding areas in the south of Wales are the strongest property market in the principality. Local property experts pinpoint the regeneration area around the city’s new station and Central Square development as of particular interest for investment properties. Pontcanna, a green suburb around five minutes from the city centre is also on the investment map.
The North of England Property Market 2020
The north of England is another region where the property market, especially in terms of investment properties, has outperformed over the past few years. And is expected to continue to do so over the next several. The region has also been boosted by Boris Johnson’s election mandate pledge to invest billions of pounds in improving the north’s infrastructure. Manchester, Leeds, Liverpool and Sheffield will all expect to benefit from that commitment.
Savills forecasts north west of England property prices to gain 2.5% this year, jumping to 6.5% in 2021 as greater post-Brexit clarity loosens purse strings and government investment in the region kicks off. The region is predicted to see growth of 24% between this year and 2024. Yorkshire and the Humber are the northern region expected to see its property market perform best, after the north west.
Manchester and particularly the suburbs of Didsbury and Chorlton are tipped as up-and-coming due to the appeal they hold for professionals and young families. Local real estate agent Crispin Harris explains:
“They are becoming fashionable, trendy areas with a young vibe and are far more affordable than the next ring of suburbs out.”
The Scotland Property Market 2020
Scotland’s two major cities of Edinburgh and Glasgow are expected to see price growth of 16.5% and 13.7% respectively by 2023, says real estate consultants JLL. Across the country, price rises are expected to reach almost 20% over the next 5 years. Edinburgh’s Leith Walk has already seen steep property price rises over the last decade or so but those are expected to continue, with the area boosted by the redevelopment of the St James Centre and the extension of the tram line which links the city centre with the airport.
John Boyle of Glasgow’s Rettie estate agents expects the west coast city, Scotland’s largest, to see property investors focus on the West End, city centre and Merchant City, where price gains and rental returns are expected to be strongest.
