3 Reasons why now is a great time to invest in the UK property market

1. Prices are set to rise dramatically

The fundamentals of economics are supply and demand. The UK is a small island with a large and growing population. We have a low supply of properties being built and a high demand for these properties from our population growth. This means prices can only go up.

Studies indicate that the UK needs to build at least 300,000 properties every year to meet the level of demand. And yet in 2024 217,911 were built. 2023 saw 231,000 built and 253,000 in 2020. Which means the problem is merely being exacerbated. We are not building enough and the lack of supply means prices will continue to go up.

Despite what we may think about our country, our politicians and our many societal issues, the UK is a very stable country and highly regarded around the world. This is clearly evident when compared against the performance of other nations and especially evident when we look at the amount of overseas investor buying properties in our cities across the country. This stability, coupled with a lack of supply, bodes incredibly well for UK property prices.

If we look at the last 5 years (2019-2024) we have been through economic turmoil. Brexit, Covid, 14 consecutive interest rate rises, double digit inflation, two world wars, Liz Truss crashing the economy and yet somehow, despite all of this turmoil, UK Property prices increased. It’s nothing short of remarkable. Why have they increased? For the reasons mentioned above, high demand and under supply coupled with a stable mortgage market that doesn’t allow owners to be over leveraged.

2. The Government know that prices are going to rise (and they secretly told us so!)

In October 2024 the Government introduced an instant increase in Stamp Duty to Property Investors. It was increased from 3% to 5%. This meant that an investor who was buying a property was immediately hit with a higher stamp duty charge. A charge on average in the low thousands of pounds, not hundreds of pounds. It was a big deal. And yet despite this, hardly any property transactions fell through. Why? Because savvy investors know that prices are rising dramatically and the extra hit in stamp duty is worth paying.

The other question is why did the Government increase the Stamp duty levy from 3% to 5%? 

The simple answer is because they know they could. They could get away with it because it wouldn’t have much of an impact on the sector whilst simultaneously raising billions of pounds in tax revenue. The Government know that prices are going to rise because it’s so obvious, so they’ve increased the tax bracket for investors to get access to the market. Very clever if you ask me, and a clear indication that the economics show that prices are set to rise in the coming years.

3. Mortgage rates are coming down meaning rental returns are going up…& prices will go up

Interest rates peaked at 5.25% in August 2023 and remained there for a full year. Since then, there have been 3 drops to the current rate of 4.5%. 

But what’s going to happen next? 

The answer is that no one really knows but all signs indicate further drops which is very positive for everyone. The most widely held prediction is that we will have another 2 drops in 2025, bringing the base rate down to 4%. Although this might happen sooner than expected given the recent actions of a certain American businessman turned TV star, turned politician.

Some of the UK’s biggest mortgage lenders (Halifax, Natwest, Nationwide) have just released 2 year fixed rate mortgages below 4% which bodes incredibly well and is a strong indication of what is to come. 

But why is this a good thing for property investors? It’s good for 2 reasons.

1. The cost of borrowing money goes down. When an investor buys a property with a mortgage, the monthly payments are less which means there is more rental income for them to enjoy. 

2. Lower mortgage rates will attract more owner occupiers and investors to the market. More buyers means more activity, more activity ultimately means prices increase. Great for those investors who are investing today, who will get to enjoy the profits to come.