Housing undersupply and economic growth make UK hotspot for real estate investment

By: Xavier Basil
Xavier Basil
Born in Angola and brought up in Portugal, Xavier came to the iNVEZZ team via a previous career as… read more.
on Sep 8, 2015
Updated: Oct 17, 2019

The UK’s housing shortage and its strong economic growth have boosted the appetite for real estate investment in the country, City AM reported, citing a recent study by property firm Savills. The research ranked the country’s residential market, which has seen a 20-percent increase in price over the past five years, as the fourth-best in the world in terms of returns on rents and capital gains. The UK was only behind the US, the United Arab Emirates and Singapore. The results were based on economic performance and growth prospects alongside population growth, Savills clarified.

“When a growing population, growing affluence and limited housing or land supply converge, we would anticipate real house price growth,”said Yolande Barnes, director of Savills world research.
Meanwhile, a separate piece of research conducted by Property Week and Grainger has suggested that house prices will continue to increase unless government makes changes to housing policy.
The trend outlined by both reports received statistical support last month, when a slew of industry data showed that the chronic undersupply of housing in the UK continued to drive house prices higher in the second quarter of the year (https://invezz.com/news/real-estate/19999-UK-residential-property-investment-potential-climbs-amid-shortage-of-new-stock – UK residential property investment potential climbs amid shortage of new stock). The figures showed that house prices in cities had risen by an average of 4.3 percent in Q2, which was the highest quarterly growth for the past 11 years. At the same time, the number of new home starts in the period fell by 14 percent to 33,280, some six percent lower on an annual basis.
“The strength of the UK economy, rising wages and an undersupply of housing stock on the market are combining to underpin UK house prices,”Knight Frank’s Gráinne Gilmore observed at the time.

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