From an economic point of view, investment in purchasing UK property is a beneficial direction, as it provides real yields about 10.3% annually. ‘The calculation is as follows: from the national UK house price index of the Nationwide Building Society, grew in June by 11.8% we subtract the consumer inflation rate, which is 1.5%’, EXNESS experts say. Therefore, the expert company does not believe that the UK property market has arisen as a ‘bubble’. In the coming months, the situation in this sector is likely to get stabilised.
This upsurge is provoked by Indian, Arabic, Chinese and Russian investors, showing interest not only for luxury accommodation in this city, but also focused on the mid-price segment, Vadim Tkachenko, the Partner of vvCube companies and CEO of appraisal company Fair Value explains. British themselves do not particularly heat up real estate market. But there is a factor of economic instability, incomprehensible situation in global economy and developments in the euro area, which led many hedge risks in the British real estate as the main guarantee of stability.
The sharp rise in property prices in the UK is largely associated with the growth of credit and the general improvement of the situation on the world financial markets, says analyst MFX Broker Matthew Cornell. Unprecedentedly soft monetary policy of the Bank of England and the Federal Reserve have led to a reduction in key interest rates. The Bank of England has set its key interest rate at 0.5% and the Federal Reserve at 0-0.25% rate. Such a policy leads to an increase in the availability of cheap money, which is invested in stocks and real estate market. So the key rate on 10-year UK bonds, upon which the mortgage bank rate is calculated, declined from the level of 5.4% in 2007 to 2.55% in 2014.
Thus, the policy of cheap money in England and the United States has led to the emergence of the bubble in the property market in England. Most likely, as experts predicts, Bank of England in the nearest future will be forced to tighten monetary policy by raising interest rates, which will have a negative impact on the real estate market and real estate prices will cease a significant growth for a certain period of time. The recently introduced measures to tighten the foreigners buying real estate conditions in England would lead to a decrease in the activity of real estate purchases by investors from the USA, who now have access to really available, cheap loans. The estimations of the largest conveyance solicitors based on real statistics say there is no way the market is going to experience a decrease. According to various estimations, it is expected that the price in the capital will keep on increasing in price in the next 5 years and experience a possible increase by 15 – 35% (!) in the next decade.