UK property: Invest now for best capital gains prospects over next 10 years
Investing in the UK housing market with an eye to the future remains the best strategy for top returns. New research forecasts major house price rises over the next decade, and buyers who invest now will benefit the most. Property buyers, whether owner-occupiers or investors and landlords, are generally advised to play the long game when it comes to property investment. The longer you can hold onto your property before selling, the better. Despite the monthly peaks and troughs that can occur in house prices throughout the year, overall values continue to climb annually.
Property investors who buy now could see average capital gains of around 30.3% if they sell in 10 years. That's according to a new report from comparethemarket.com. The study uses historic data to predict what lies ahead in the sector, and the outlook supports long-term investment. Using ONS figures, Compare The Market put today's average UK house price at £248,496. In five years' time, this is expected to rise to £286,107. But for homeowners who hold onto their properties for longer, the average price could be £323,718 by 2031.
Where should you invest? Selecting the optimum location in which to invest is one of the first things to consider. For many homeowners, buying close to work, family and friends is often a top priority. However, for property investors and landlords, there are a myriad of factors to consider. Rental demand and prices vary across the country, and it is important to prioritise tenant trends and needs. For example, as more people now work from home, properties don't need workplaces right on the doorstep.
If you are just crunching the figures in terms of capital gains, Compare The Market's report puts Greater London at the top of the list. With current house prices standing at £465,549 in the capital, the data predicts an increase of 33.1% to £619,568 by 2031. However, investors need to think about yields, too, which tend to be greater in other regions. The north-west, for example, has some of the highest available rental yields in the country. In this study, the area could reap impressive capital gains of 28.
5% over the next 10 years. This is with house prices rising from £171,854 at present to £220,859 in 2031. The low price point of the area is what attracts many investors, alongside the competitive yields and strong rental market. Yorkshire, the north-east and the East and West Midlands are other hotspots for property investment, offering low property prices combined with good yields. In terms of potential house price rises, they all offer great prospects as a place to invest (Yorkshire 28.6%, north-east 28.
4%, East Midlands 29% and West Midlands 28.9%). Changing trends in homeownership Compare The Market's report, Future of Home Ownership, also looks at the average age of the first-time buyer. This age has continually crept up over recent years as people rent for longer and commit to owning later in life. At present, the average age at which people get onto the property ladder in London is 35. Across the rest of England, this is slightly lower, at 33.1. However, this is set to rise over the next decade as people invest in a home even later, the report predicts.
By 2031, it estimates that Londoners will be 37 on average by the time they own a home. Elsewhere, the age will have crept up to 34.7. The report adds: "With house prices rising, it makes sense that so too, does the trend for the average age of the first-time buyer." "In 2006, the average age of a person getting on the property ladder was 32 in London and 30.6 in the rest of England, which then rose to 34.5 in London, and 32.2 in the rest of England in 2020. This trend is predicted to continue over the next ten years.
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