UK property investors to focus on yields post-Brexit?

UK property investors to focus on yields post-Brexit?

As average UK property values record their first quarterly fall in four years, is focusing on strong yields now more important than ever?

Summary:

  • Average UK property prices have suffered their first quarterly fall in four years
  • Post-Brexit uncertainty was predicted to cool the market as the country begins the process of leaving the European Union
  • While investors will be confident of long term capital growth, focusing on the country’s highest yielding cities will drive returns in the short and mid-term

Has there ever been a more important time to focus on property that will deliver the strongest yields possible?

Average house prices in the UK have just suffered their first quarterly fall in four years in the three months to September, and have fallen at their fastest rate in over five years. The latest figures from Halifax showed that average values dropped by 0.5% in the third quarter of the year, proceeding growth of 1.6% in the second quarter.

The UK’s vote for Brexit in June’s EU referendum saw many economists and property experts predict a cooling of the market, as greater levels of caution were applied by investors until more information about the country’s future outside of the Union became clearer.

“The UK’s vote to leave the EU has been accompanied by a clear cooling of the housing market,” said Chris Williamson, Chief Business Economist at IHS Markit. “(The) future trajectory of prices will be very much determined by which path the government decides to choose in taking the country away from the EU.”

Property has always been an asset that works best for investors with a long term mind set, and given that none of the fundamentals that underpin the market have changed as a result of the vote on June 23rd, investors will be confident of experiencing the kind of capital gains British real estate is renowned for once the UK’s economic future becomes clearer.

But while a level of immediate uncertainty remains, should more investors focus on high yields in the UK’s expanding private rented sector instead?

This week (October 13th) it was revealed that average rents in England and Wales hit a new record high of £887 per month. In cities such as Manchester, home of the country’s highest yields where some property generated annual returns as high as 8%, investors are using the current economic climate to secure assets that will generate a healthy income in the short and mid-term.

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