The UK is a state comprising Wales, England, Scotland, and Northern Ireland. Despite the current issues plaguing the country, the UK remains an economic powerhouse with extensive political and cultural influence worldwide. The country’s economy is one of the biggest in the EU, particularly in the service-based industry. The City of London serves as the country’s leading financial hub.
The UK Economic Status
The UK follows an open, advanced capitalist economy. Some consider it a socially-focused European system mixed with the market-focused American system.
Based on the 2019 Index of Economic Freedom report, the UK’s score is 78.9. This score describes the country as the 7th freest in the world. Compared with the previous score, it increased by 0.9 points, owing to it to the significant improvement in fiscal health and better scores for government integrity and spending. It is also noteworthy to see that those mentioned factors outweighed huge decreases in monetary freedom and judicial effectiveness. Among the 44 countries in the European region, the UK ranked 3rd.
This 2019 marked the UK’s departure from the European Union caused policymakers to take a look at the dreary productivity growth. After the Brexit, the economy is recovering, but there are still areas that continue to struggle. It is a good thing that the country already has a liberal labour market in place.
The country has a stable rule of law, particularly when it comes to respecting private property rights. The UK ranked 8th in the World Economic Forum’s 2017-2018 Global Competitiveness Report. The 2018 Corruption Perceptions Index by Transparency International ranked the UK 11th in the least corrupt nation, out of 180 countries.
In the recent PwC economic outlook, the UK economy will grow modestly at 1.4% this 2019. In 2020, the projected UK growth is pegged at 1.3%. It is much lower than the long-term trend rate of 2%. Note that this projection takes into account the successful Brexit deal.
Liveability in the UK
In the annual survey by ECA International, the UK tops global list for expat packages among the top 40 financial hub countries. This ranking holds despite the weakening of Sterling. A middle manager in the UK may receive a pay package that can amount to $390,000 per year.
In the Economist Intelligence Unit (EIU) Global Liveability Index, the most liveable city is Manchester, beating London, Birmingham, and Liverpool. The city is rife with employment opportunities thanks to the significant redevelopments happening in the area.
The UK has a higher cost of living compared with most countries. However, this higher cost of living can be negated by higher pay packages. For comparison, Manchester’s cost of living is 38% and 28% cheaper than New York and Los Angeles but is about 7% more expensive than living in Madrid. London is driving people away with its high cost of living. In the data provided by Guardian Jobs UK, a worker from London has an average salary of $51,200. More than 33% of this goes to housing costs, and as much as half goes to groceries, transportation, and housing needs.
Based on the OECD Better Life Index, the UK does well in ensuring the well-being of its population. In terms of environmental quality, personal security, social connections, civic engagement, health status, and job security, the UK ranks above average.
Property Investment in the UK
Property investments in the UK have considerably declined after Brexit. While this contributed to the decline, it was a long time coming. It would be safe to assume that the property meltdown in the UK resulted from a combination of several factors such as stricter tax regime, higher stamp duty taxes, lower expectations of house price growth and an increase in Annual Tax on Enveloped Dwellings.
Most of the property investment declines are evident in the London area. At the end of 2018, the number of overseas landlords fell from 26% to 10.5% in just a matter of eight years. However, although there are price drops in the London property market, other areas such as Birmingham and Manchester are headlining property growth.
When it comes to UK industrial real estate, the demand remains robust, with warehouse distribution units and multi-let performing above average. According to the JLL research, commercial investment activity in the UK hit £3.6 billion.
Property Market Trends in the UK
In recent years, the UK housing market declined significantly, with most price falls seen in London and the South East areas. However, house prices could pick up slowly in 2020, should there be an orderly Brexit. Still, there is uncertainty in the market.
Higher rental rates are also forcing people out of London to explore other areas such as Manchester and Birmingham. Based on the CBRE Outlook Report, here are some notable real estate outlook:
- The UK property will still provide stable returns.
- There will be a continued maturity in real estate technologies in 2019.
- Occupiers will continue to focus on long-term real estate strategy.
- Demand for UK office will experience slight declines.
CHG Recommendation: Investors Should Veer Away from London
The City of London receives most of the negative impact of Brexit. Therefore, its economic outlook is not as impressive compared to other areas in the UK. Property prices are falling, as most occupiers choose to move out of the city due to a higher cost of living.
CHG recommends investors to look at capitalising on more profitable areas such as Manchester and Birmingham, where there are more long-term opportunities for growth.
It would also be wise to invest in warehouse properties. The demand for these industrial properties will continue to increase as e-commerce goes on an upward trend.
Investors would also benefit from investing in UK care homes. This sector in the UK economy is one of the driving forces that make the country an investment hub. The country has tons of established care homes that need funding from investors. If many of the foreign investors can take advantage of this opportunity, gains can total to as much as 30%.