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House prices are at a record high in the UK, says Halifax. Home prices rose 4.7 per cent last year, according to the Nationwide House Price Index; in London, a mystery buyer dropped £139mn on a Regent’s Park pad. Private equity and other investors have been targeting UK apartments.
All this bullishness deserves some caveats. Britain is home to many — very different — residential markets. London will always be an anomaly, with some specific spots running particularly hot.
Prices around Kings Cross, once a rundown corner on the outer fringes of central London, outpaced prime central London in the years after Google began setting up its UK headquarters there in 2013. Expect some residential spillover too from China’s planned new mega embassy, 2.5 times the size of its current mission, at Royal Mint Court, near the edge of the City of London.
For institutional real estate investors buying property to rent it out, geographical diversification is key. Look 500-odd miles north in Aberdeen, where the oil rush fuelled some of the nation’s priciest homes in the 1970s; now it has some of the cheapest.
But picking the right location is not the only challenge for investors. They also have to contend with changing rules.
Landlords control a big chunk of the UK market: about one in five households live in privately rented homes; in London the more than-1mn private renters make up 29 per cent of the market, on latest government data. Changes in capital gains tax, high interest rates and a move towards more tenant-friendly rules have dented the calculus in the past couple of years. More mortgages on buy-to-let fell into arrears in 2022 and 2023, although the trend reversed slightly in the third quarter of last year.
The Renters’ Rights Bill, which will probably pass into law in a few months, continues the theme. This replaces fixed tenancies — aka landlord certainty of cash flow — with a two-month notice period, limits rent increases to once a year, and then only if it reflects market conditions and is deemed fair should tenants object.
For first-time buyers, too, there are challenges. They will be hit by changes in stamp duty from April, when the threshold at which levies are due is lowered.
Latest-quarter data, showing the first dip in rental prices outside London since the pre-pandemic era, gives further pause. Increases within London are positive only by a rounding error. Government housebuilding plans also tip the scales. Tenants already know that house-hunting can be a real source of stress — now landlords do too.