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Rics paints positive picture for property investment

2nd June 2006 | back to article listings BACK    print this article PRINT

With property investment in the UK now drawing more interest than ever, a new report has indicated that potential returns are good in both the residential and commercial sectors.

The most recent UK Economic Brief from the Royal Institution of Chartered Surveyors (Rics) shows that house prices increased for a sixth consecutive month in April. It has been an outstanding period for house price rises, with investors in the buy-to-let sector and those looking purely for capital appreciation both enjoying buoyant conditions.

A strengthening economy has also boosted the property market, with demand for housing remaining high despite gently rising levels of unemployment.

While recent reports have suggested that house price growth may well be set to cool in the months ahead, Rics observes that there is still a "fundamental mismatch between housing demand and supply" that is supporting the price increases.

On the other hand, there are signs that construction is increasing dramatically and the 42,522 houses built in the first quarter represented the highest total in 16 years. Even if this rate of housebuilding continues, however, it is thought that it will be insufficient to match similarly escalating demand.

With high divorce rates and a growing trend of independence, the UK is seeing a greater number of people looking to live alone each year and this is being accommodated by building trends.

Flats accounted for 41 per cent of all new homes that were built in the financial year 2004/05, which is double the proportion from just five years earlier. Rics does state, on the other hand, that this is in many ways going against the grain of medium to long-term demand.

"Even though household sizes may be falling, rising income levels and rising aspirations of consumers, mean that demand for larger properties will grow over time, not fall," said the institution in a statement.

In the commercial property market, occupier activity reportedly continued along its path of gradual improvement in April. Rental growth in the month was actually faster than it has been since October 2001, with the office market enjoying the most impressive period of expansion.

The annual growth rate over the last three months in the office market was two per cent and Rics reports that this is double the rate seen three months previously.

Based on its analysis of economic growth, Rics concludes that rental rises are set to continue next year, while investor demand for commercial property is also expected to remain strong.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/2732.html. Alternatively, please see our full press release archive.

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