What will your real estate investment be worth in five years?

A key part of a successful real estate investment is seeing its value increase over time. New forecasts show why UK housing remains a good investment choice.

Savills, a world-renowned real estate agent, has released his latest five-year forecast for the UK property market. The report examines both the main and traditional residential markets, and for those with real estate investing on the agenda, there are some interesting regional forecasts.

While transaction levels are expected to return to normal levels, after an unprecedented increase since the pandemic, house price growth will slow but continue on an upward trajectory, Savills said. This is in part due to the continuing shortage of supplies in many parts of the country.

Lucian Cook, Residential Research Manager at Savills, commented: “After such intensity in the market and without the imperative of a stamp duty holiday, we know there will be less urgency in the market. from 2022. Indeed, we have already seen the growth in house prices over three months over three months fell from 3.9% at the end of June to 1.7% at the end of September.

But as always, some locations still have big price hikes ahead of them.

UK regions for property investment

Regular house prices will rise + 13.1% in the UK by 2026, according to Savills. This is with increases that slowly decrease from year to year, with an increase of 3.5% in 2022, followed by 3%, 2.5%, 2% and 1.5% in the years that follow.

But region by region, the picture can be radically different. Recently, the markets furthest from London have seen the strongest price growth. For those studying real estate investing options, it looks like these trends are largely set to continue.

In the northwest, house prices could increase by 18.8% over the next five years. So for an average property bought now at £ 200,000 that would represent a gain of £ 37,600 by 2026. The Yorkshire and the Humber reflect this with the same expected 18.8% increase.

Wales is next on the list with 18.2%, followed by the North East (17.6%), East Midlands (15.9%) and West Midlands (15.9%). All of these areas have experienced positive housing market growth in recent years, with many locations in these areas recognized as hot spots for real estate investment.

At the other end of the scale, Savills predicts that London will see house prices rise 5.6% by 2026.

Generate rental returns

While potential capital gains are an important part of buying a home, high rental yields can make a real estate investment more profitable over time.

Savills also examines the country’s rental market in its report. He found that the year so far has been particularly strong, as has the buyer’s market, in the private rental sector. Year-over-year rental growth came to Manchester, Birmingham and Edinburgh, key rental areas in the UK.

Demand from tenants in cities remains strong, despite the “space race” observed in some industry sectors. This has kept rents in London at a high level in recent months. The massive growth of the rental construction sector is also helping to keep the rental housing stock afloat.

In terms of price forecasts, Savills expects rents to be 19.9% ​​higher by the end of 2026 than they are now. The agency says this correlates with long-term income growth.