Property prices across the UK will rise by 6.1% in the next five years, bringing the average property value to almost £300,000, according to new research.
It is expected that property hotspots will emerge in the North of England with employment opportunities and business start-up rates helping to close the gap on the current property hubs of London and the South.
The research from Barclays Bank also predicts that buy to let investments and high net worth millennial investors are set to lead the way in fuelling the property market going forward and they are likely to look for higher yields outside of London.
Overall, despite an uncertain economic and political climate, the report says that the UK property market remains buoyant with prices set to rise by an average of 6.1% by 2021 with high employment rates and an increase in rates of average earnings contributing to rising property prices across the country.
London is set to see prices rise the most with growth of 11.88% by 2021, followed by the East of England with growth of 9.38%, the South East up by 8.74% and the East Midlands up 6.67%. Scotland and the West Midlands are both projected to see price rise by 5.88%.
The South West is expected to see price growth of 5.31% over the same period, the North East 5.31%, the North West 4.01% and Yorkshire and the Humber up 3.6%. Northern Ireland and Wales are set to see the lowest price growth at 3.04% and 2.88% respectively.
However, while the South of the country is expected to see the largest property price increase over this period, property investors are looking north for good value for money and income stability. Some 38% of high net worth investors looking to purchase property in northern regions think that property prices are going to rise there, with 27% who plan to purchase citing strong rental income as a reason to invest there.
The report points out that the Midlands has the fourth highest expected price increase in the UK at 6.28%, behind London, the East of England and the South East. Warwick in the West Midlands has emerged as one of the top 20 areas of highest growth, with an expected increase of 29.5%, driven by higher than average earning rates and the highest level of business start-up rates in the region.
Scotland has the fifth highest expected price increase at 5.88%. East Renfrewshire makes the top 20 areas of highest growth with an expected increase of 23.8%, with its large proportion of highly qualified residents expected to drive up prices.
The research reveals that younger investors will be a key driver in the growth of the UK property market over the next three to five years. The millennial investors surveyed have 41% of their investment portfolio tied up in property, compared to 23% amongst those aged over 55.
The younger group are also more bullish in their approach to investing in bricks and mortar with 75% intending to increase the percentage of their portfolio in property over the next three to five years, compared to just 10% of over 55s.
The research also shows that millennial investors are also more likely to own more than one property, compared to over 55s, and are reaping the financial rewards of multiple property ownership with 48% of their annual income generated from rent. Those aged 18 to 54 who are planning to buy new property are more likely to take advantage of a buy to let mortgages to fund future property purchases at 23% compared to just 7% of those aged 55 and over.
Despite figures from the Council of Mortgage lenders showing that buy to let lending has slowed, the research suggests that it is on the rise among investors who want to expand their portfolios despite the recent tax changes that affect them.
The report also reveals that higher value investors are seeking to maximise returns through property purchases 65% of those looking to buy doing so for rental income. Some 62% of those with rental properties expect the proportion of the income they receive from rent to increase over the next three to five years, with half predicting it will rise by up to 20%.
‘It’s encouraging to see that property is still viewed as an important part of the investment portfolio with high net worth investors typically owning three properties and over a quarter planning to buy property because they believe that it offers long term investment security,’ said Dena Brumpton, chief executive officer of Wealth and Investments at Barclays.
‘There is also increasing confidence among property investors, as many are taking a long-term view when it comes to putting money into property. It’s also interesting to see from our research how investment prospects are emerging outside of the established property heartland of London and the South of England, with economic growth and employment opportunity fuelling growth in hotspots across the UK,’ she explained.