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UK House Prices Seen Rising Over Next Five Years, Market Shrugging Off Uncertainties - Barclays

Tom Burroughes

24 May 2017

UK house prices are expected to rise by 6.1 per cent between now and 2021, with the average house fetching almost £300,000 ($389,500), according to the Barclays UK Property Predictor issued today. The report also shows that high net worth individuals are upbeat about the north of the UK, although not yet seeing the fastest gains.

The report shows property hotspots emerging in the North with employment opportunities and business start-up rates helping to close the gap on property hubs of London and the South; buy-to-let investments and high net worth millennial investors are set to lead the way in fuelling the property market, the report by said.

Despite an uncertain economic and political climate caused by developments such as Brexit, the UK property market remains buoyant, it said.

The south of the country is expected to see the largest property price increase over this period, however property investors are looking north of the property hubs of London and the South East for good value for money and income stability. Over a third (38 per cent) of high net worth investors looking to purchase property in northern regions think that property prices are going to rise there, with over a quarter (27 per cent) who plan to purchase citing strong rental income as a reason to invest there.

The Midlands has the fourth highest expected price increase in the UK at 6.28 per cent, behind London, the East of England and the South East. Warwick in the West Midlands has emerged as one of the top 20 areas of highest growth, with an expected increase of 29.5 per cent, driven by higher-than-average earning rates and the highest level of business start-up rates in the region. Scotland has the fifth highest expected price increase at 5.88 per cent. East Renfrewshire makes the top 20 areas of highest growth with an expected increase of 23.8 per cent, with its large proportion of highly qualified residents expected to drive up prices.

Millennials
Younger high net worth individuals will help drive growth of the UK property market over the next three-to-five years - perhaps unsurprisingly as they age and raise families. The millennial investors surveyed have 41 per cent of their investment portfolio tied up in property, compared to 23 per cent amongst those aged over 55.  They are also more bullish in their approach to investing in bricks and mortar with 75 per cent intending to increase the percentage of their portfolio in property over the next three-to-five years, compared to just 10 per cent of over 55s.

Millennial investors are also more likely to own more than one property, compared to over 55s, and are reaping the financial rewards of multiple property ownership with almost half (48 per cent) of their annual income generated from rent. Those under 55 (18-54 year olds) who are planning to buy new property are more likely to take advantage of a buy-to-let mortgage product to fund future property purchases, 23 per cent compared to 7 per cent of those aged 55 or over.

Buy-to-let investment on the rise
Investors are leaning on buy-to-let to fuel their property portfolios, despite the recent changes to buy-to-let tax. Higher value investors are seeking to maximise returns through property purchases, with nearly two-thirds (65 per cent) of those looking to buy doing so for rental income. Sixty-two per cent of those with rental properties expect the proportion of the income they receive from rent to increase over the next three-to-five years, with half predicting it will rise by up to 20 per cent.