As you kick-start your new year, we wanted to share with you our thoughts on the two property investment trends we see for 2020. So, here we go…
1. London and the Southeast will continue to underperform
The UK property market is a two-speed market. London and the Southeast are highly exposed to the financial sector and the City of London, international flows of capital and overseas buyers. Property in the capital, especially prime central London, is still very much seen as a flight-to-safety asset for many of the geopolitical and regional risks in other world markets. In contrast, the regional UK property market is very much driven by supply and demand factors. In this context, the UK suffers from the most serious housing crisis in decades due to a shortage of supply. The UK’s housing shortage has been described by successive governments as the nation’s most urgent and complex challenge and solving it as “the biggest domestic policy challenge of our generation” [1].
Even assuming that we “get Brexit done” as the various political leaders promise, we believe that the current uncertainty will be far from over after January 31st. In our opinion, the post-Brexit negotiation process will be arduous and rocky, to say the least. In this context, we believe that the London and Southeast of the UK property market will continue to underperform in 2020. Figure 1 below shows how the various UK regional property markets have performed in 2018 and 2019 so far.
Figure 1: House price performance across the UK regions
Source: Nationwide House Price
2. We are bullish on HMO’s and serviced accommodations in the right locations
Let’s face it, getting on the property ladder for first time buyers and millennials is tough. The figure below shows that in London, first time buyers are having to spend up to 57% of their take home income to pay for their mortgages. The figure is just below 40% in the Southeast of the UK and 19% in the north. This chart pretty much summarises why Houses of Multiple Occupations and serviced accommodations have become so popular in recent years. Millennials and young professionals are increasingly postponing buying a house and living in shared professional accommodation. We expect this trend to continue in 2020. Therefore, we are bullish on HMO’s and serviced accommodations in the right locations (i.e. near large employment hubs, universities, transport links).
Figure 2: First time buyer affordability measure: mortgage payments as % of mean take home pay
Source: Nationwide House Price
We hope that you have a great year ahead and we look forward to continuing to work with you.
Cheers,
The Blend Network Team
Blend Network News 