Real estate investment is crucial for economic recovery

The past two years of economic uncertainty, induced by the global pandemic, have hampered strong performance across most industries. Certainly, all will be happy to see the back of the restrictions and blockages that have weighed on growth as companies seek to recover.

Yet amid the volatility, the UK property market once again flourished, underscoring the sector’s reliable reputation in these times.

This resilience was likely made possible by investors seeking financial opportunities that have historically been more reliable during a time when other potential assets did not seem as safe.

What’s more, there doesn’t appear to be a slowdown, with buyers acquiring property faster than ever, twice as fast as in 2019, according to data from Rightmove.

Along with the booming market activity, rising house prices have continued to rise even throughout the pandemic. According to Nationwide’s April house price index, average house prices reached £267,620, with price increases increasing by more than 10% in every month but one over the past year.

Despite positive growth, the industry must remain prepared for potential challenges ahead. The purchase rate is a consequence of a shortage of goods, a situation that cannot last forever. And pundits predicted house prices would be pulled down by squeezing the cost of living and rising mortgage rates.

This is why many will welcome the return of international investors since the end of Covid restrictions earlier this year.

Why is overseas investment important?

The health of the economy and the health of the real estate market are closely linked. Consumer spending and borrowing are affected by increases or decreases in house prices. As such, receiving inward investment will be crucial to sustaining market growth and therefore the UK’s economic recovery.

And judging by the numbers, that should be the case since travel restrictions in the country were dropped in February.

According to Knight Frank’s City Wealth Index section of its 2022 Wealth Report, London saw more cross-border private equity in property in 2021 than any other city in the world, with more than $3 billion (2 £.39 billion) invested. Their forecasts estimate that this trend will continue in 2022, with an additional $24 billion expected to be invested in the capital.

Given the current housing crisis that is desperately needed to be addressed, a significant increase in investment would be welcome in order to address the vast housing shortage.

To make up for the shortage, the UK needs to build 340,000 new homes a year, of which 145,000 are expected to be affordable. However, only around 216,000 new homes were delivered in 2020-21.

More often than not, news of international investment flows into the UK property market is greeted with some disdain due to the negative connotations associated with housing shortages. However, foreign investment can kick-start real estate development by buying new off-plan residential units and financing development programs.

That’s a huge plus given the slowdown in construction activity due to pandemic-related issues.

Penny D. Jackson