The property market has seen its share of highs and lows over the last 12 months. Back in April 2019, speculation about a housing crisis arose as the market was temporarily shut down due to Covid. One year on, and the landscape looks vastly different with house prices seeing a 4.8 per cent increase in the past year.
While there’s cautious optimism about the ascension of property prices, talks of a crash haven’t disappeared entirely. Yet, the outlook is more promising than it was this time last year, even in London, where some specific property types have performed above expectations.
For investors, the news trickling in about the market is only good news – especially as those who held firm over the last 12 months saw their assets appreciate. But moving forward, how does the landscape look, and is there a specific property type investors should try to acquire?
Flats and maisonettes lead the way
According to government data analysis, London flat and maisonette prices rose by 9 per cent to £442,304 in the last 12 months. The numbers are promising for a market which has seen an increase in people leaving the city for rural locations.
It shows the London market in good light, and demand continues to pick up pace despite fewer people living in the city at the moment. The temporary break on stamp duty is one reason for the increase, with all London property types seeing a 9.7 per cent increase, as is pent-up demand from last year’s shut down.
But it’s with flats and maisonettes – traditionally the more affordable form of housing – that lead the way. These property types also happen to be ripe for investment, with apartments historically performing more resolutely on the rental market than larger-sized homes.
While London’s house price increase is encouraging, the UK property market isn’t in the clear just yet. Inflation only grew by 0.8 per cent. Price rises of almost 10 per cent aren’t sustainable with such low inflation numbers.
Looking ahead it’s reasonable to expect more economic volatility with Brexit and new strains of Covid. Plus, there’s still no end in sight for the current national lockdown, which will further fuel economic vulnerability.
However, the current landscape is especially promising for investors. They’ve seen their assets appreciate in a market where they were expected to get little change. Plus, a strong rental market has ensured healthy short-term gains to coincide with capital appreciation.
Holding firm pays dividends
Even with the possibility of price volatility going forward, there’s no reason for landlords to push the panic button. The latest house-price increase shows that landlords who held onto their properties were rewarded for keeping their nerve.
There’s no need for a different approach in the months ahead, either, when the stamp duty holiday comes to an end, and the market finds its feet after Covid and Brexit. With a Covid vaccine in distribution, there’s more reason for optimism as a growing number of people should return to the capital once normal life resumes in some capacity.
There may be some ups and downs during the rollout, but a well-performing rental market holds the key for many investors. Even if there is a short-term property price fall, demand for rental homes continues to grow.
Rental market impact
Despite the impact of Covid, rents in London are expected to surge within the next four years. Some reports even have them increasing by as much as 34 per cent weekly. Lower homeownership rates will continue to fall too, leaving a gap in the market which needs filling by the private rental sector (PRS).
By 2025, 60 per cent of residents in London will be made up of private renters. The outlook bodes well for investors who can offer high-quality homes that meet demand. And with the number of UK investors reaching an all-time high in December 2020, there remains an appetite for the property investments.
Therefore, current property owners – whether single home or portfolio holders – find themselves in a strong position. The rental market will grow in importance in the years to come, with homeowners falling by 7 per cent nationwide and renters increasing by 9 per cent.
Turning your attention to flats and maisonettes
With a record number of landlords on the market, should current and new investors look to apartments for the best returns? While good investments come in many forms, there’s a strong argument for flats and maisonettes as the best type of investments.
These homes appeal to young professionals, who are the most important renting demographic. They’re also the most in-demand property type, especially one and two-bedroom flats and maisonettes.
It doesn’t come as a huge surprise to see they lead the way in London house price growth. They’ve fueled the boom for house prices in the capital, and are ripe for being converted into investment homes, from those with a mortgage, cash buyers and overseas investors.
A market that’s anything but flat
Despite initial fears, the London market remains strong, with flats and maisonettes in high demand. Property investors can feel confident in the London property landscape moving forward, as demand for rental homes increases and opportunities for savvy investments arise.