Homes in hot spots across the U.K. are set to see a 6.1% price increase by 2021, bringing the average property value to nearly £300K. The dramatic growth will be driven by buy-to-let investments and high-net-worth millennials, according to new research from Barclays.
Barclays' U.K. Property Predictor provides a three- to five-year forecast of investment hot spots in the residential property market, revealing areas across the U.K. where house prices and rental incomes are expected to rise. The area set to see the most dramatic growth will be Southern England, where over the next five years high employment rates, growth in private housing market levels and an increase in average earnings will contribute to rising property prices. Property investors are also looking north of the property hubs of London and the South East for good value for money and income stability.
Age determines investment behaviour
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The research reveals that younger high-net-worth individuals will be a key driver in the growth of the U.K. 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. They are also more bullish in their approach to investing in brick-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.
Millennial investors are also more likely than baby boomers to own more than one property, and are reaping the financial rewards of multiple property ownership with almost half (48%) of their annual income generated from rent. Those under 55 who are planning to buy new property are more likely to take advantage of a buy-to-let mortgage product to fund future property purchases — 23% compared to just 7% of over 55s.
Buy-to-let investment on the rise
Investors are leaning on buy-to-let to fuel their property portfolios, despite the recent changes to buy-to-let tax. Higher value investors are seeking to maximise returns through property purchases, with 65% of those looking to buy doing so for rental income. Nearly two-thirds (60%) 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%.
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