The majority of homeowners are positive about future house price growth in the UK. Knight Frank's latest survey revealed confidence in the state of the country's residential real estate market is at a near 20-month high, with the company's May House Price Sentiment Index - compiled in conjunction with Markit - showing capital appreciation is anticipated by people in seven of the 11 regions questioned.
Head of UK residential research at Knight Frank Grainne Gilmore stated property owners in the country appear to have "shrugged off the negative economic news about the UK's double-dip recession and the new problems facing the eurozone". Tim Moore, senior analyst at Markit, agreed, describing sentiment as "surprisingly resilient in May". However, he noted there has been no indication the gap between the north and south of the country has started to close, commenting that "if anything [it] widened slightly since April". London, the south-east and east of England were the most positive regions in terms of house price growth expectations for the year ahead, with households in the north-west and West Midlands the least optimistic about the prospects for residential property.
Ms Gilmore stated: "As perhaps is to be expected after the recent price performances in the capital, those living in London expect the biggest house price growth over the next year. At the same time, optimism in the south-west of England slipped for the first time since January, underlining the increasingly regional nature of the UK housing market." Although London may be a major target for investors due to its robust nature, there are regional locations that can be equally attractive for a real estate investment, especially where rental income is concerned.
A report published recently by Savills that assessed the UK's residential property investment market highlighted some clear hotspots outside the capital, such as Oxford and Brighton and Hove, where demand for rental homes significantly outpaces supply. The firm also pointed to the changing dynamics of the country's rental market, explaining that while investors previously bought residential assets for their capital appreciation, income growth has improved significantly, thereby attracting a higher number of institutional investors to the sector. According to Savills' figures, average rents climbed by 5.2 per cent across the UK in 2011, with this figure standing at 7.2 per cent for London. The organisation added demand for this type of accommodation is likely to remain higher than supply over the next five years, "keeping rents under upward pressure".