Property growth in 2018 was mixed, with London seeing a general fall in demand with areas such as Manchester and Canterbury seeing surprisingly high growth. Although hugely difficult to forecast for 2019, the best guess contributed by most experts is – expect more of the same.
This highlights the importance of identifying the fundamentals of supply and demand in the UK market, particularly focusing on rental growth to deliver capital appreciation.
Capital growth is expected to account for just 30% of total returns across UK property to 2023. This is surprising, with the forecast a whole 10% lower than at the start of 2018. This is also noticeably down on the average 55% share we have seen over the past 10 years.
Income returns are predicted to rise to 70% of total returns. This highlights the importance on rental returns over the appreciating value of a property.
For the second year running, we see Urban logistics as having the highest forecasted returns, this being 10% annual returns until 2024. The reason for this growth being the sector attracting significant investment on the back of some serious rental growth.
With predictions that London is to have an undersupply of Grade A office space going forward, a smart investment could be in office development in the capital – opportunities that are going to surface over the next 12 months. With a re-pricing in the retail sector emerging, this could be a highly opportunistic move for property investors.
With a political desire to increase housing across the UK, a range of types and tenures is predicted to create residential development land, bringing with this opportunity for investment. Smaller sites are predicted to be better value, offering better range than major developers.
An ever-tightening squeeze on the buy-to-let mortgage market is also predicted. Cash rich investors have turned their attention to markets in the North in search of higher yields and increased capital growth.
The build-to-rent sector is forecasted to increase in demand across the UK. This is largely cited to be due to familiarity within the sector for developers and policy makers and is expected to be matched by investors going forward, delivering competitive returns by operating at a larger scale.
Businesses that can be diversified will continue to be valuable in the rural sector. Estates in the South of England will provide the best opportunity for returns due to this diversification to both residential and commercial use.
You need to focus on your long-term goal when it comes to property investment in 2019. Place emphasis on the long-term drivers of investment success to produce income return.