When investing, the wealthy often have different strategies from the average investor. Recently, Investech conducted a survey revealing that 77% of high-net-worth individuals plan to invest more in UK property. Even though 163,000 rental properties have exited the market since 2019, the rich continue to see value in UK real estate. So, what do they see that the rest of us might be missing? Let’s dive deeper into why UK property remains a top choice for the wealthy and how everyday investors can also benefit.

Historical Performance and Stability

The UK property market has a long history of outperforming inflation, with house prices increasing by an average of 1.1% above inflation each year from 1845 to 2016. In comparison, the US saw a 1.7% increase. A Harvard study indicates that while the housing and stock markets offer similar long-term returns, the housing market is less volatile, making it more attractive for risk-adjusted returns. This historical performance and stability, particularly appealing to those who think of generational wealth, is a crucial factor driving the wealthy’s interest in UK property.

Leveraging Debt

One of the most compelling reasons wealthy individuals prefer property is its unique ability to secure debt. Contrary to popular belief, the rich aren’t afraid of debt; they use it intelligently to magnify their returns. Over the past 50 years, leverage has turned average investments into extraordinary ones. The stable property values and mature mortgage market in the UK make taking out debt against property portfolios easier. This strategy showcases the financial acumen of the wealthy.

Legal and Market Stability

The UK offers a well-established legal system, making establishing legal claims to assets straightforward. This legal clarity, combined with the global recognition of cities like London, Manchester, and Liverpool, makes UK property a safe haven for international investors. Even measures aimed at deterring foreign investment have had limited success, underscoring the market’s attractiveness.

Current Market Sentiment and Opportunities

Many long-term landlords are exiting the market due to increased taxes, stricter legislation, and higher mortgage rates. This creates a unique opportunity for wealthy investors who see the current weak sentiment as a good entry point. Property prices have fallen slightly over the past year, making it an attractive buying time. Additionally, rents have increased by over 20% in recent years, leading to higher investor yields.

The Quality vs. Cost Conundrum

Despite the high costs, the quality of UK housing leaves much to be desired. The UK’s housing stock is the oldest in Europe, with 40% of homes built before 1946, leading to poor insulation and higher energy costs. Regarding floorspace, England lags behind countries like France and Germany and even densely populated areas like New York City.