Property investors are likely to focus on the steady markets in England’s north and Midland regions in 2019, according to a forecast from Savills.
Purpose-built stock for the build-to-rent market is also set to increase its growing importance according to the estate agent’s newly-published UK Cross Sector Outlook.
Savills’ predictions come hot on the heels of new data from Your Move, which showed higher rental yields for properties across the middle and in the north of England compared to the south. Combined with so much uncertainty around the UK’s departure from the EU, Savills feel that investors will play safe in 2019 and beyond.
Hit the North – and Midlands
“Evidence suggests we have moved into the second part of the current housing cycle where the markets of the Midlands and North of England outperform those of London and the South,” says the report. “We expect this to be reflected in investor focus through 2019 and the next five years.
“With the potential for house price growth limited by the prospect of increasing interest rates and mortgage regulation, we expect investors to pay closer attention to the income stream delivered by their residential investment. This is expected to be accompanied by a shift from private to corporate investment.”
To this end, Savills have downgraded their forecasts on capital growth on total returns across all UK property until 2023. The say capital growth will account for 30% of these returns, down from the 40% they predicted a year ago, while returns from income will grow to 70%.
Build-to-rent on the rise
A shift from small-scale private landlords to larger institutions is expected to play out in the buy-to-let scene. The amount of outstanding buy-to-let mortgages grew by 1.1% in the year to the end of September 2018, but the number of build-to-rent units completed or being built rose by 30%.
“Until recently, small-scale private landlords dominated the residential property market, with a small number of large-scale private and institutional investors sitting on legacy portfolios,” says Lucian Cook, Savills’ Head of Residential Research.
“That is no longer the case. Pioneered by the likes of M&G, Delancey, Sigma, Quintain, Long Harbour and Grainger, purpose-built, institutionally owned build to rent stock has become a significant and increasingly important component of new housing delivery.”
With renting becoming more of a lifestyle choice, particularly among millennials, rather than a forced situation, savvy investors could healthy find opportunities in the coming years. A recent Property Reporter article found that more than 50% of adults aged under 40 are expected to be renting privately-owned accommodation by 2025. And in 2018, research from the Resolution Foundation found that up to one third of young adults will never buy a home.
