The recovery of the UK economy is outpacing that of significant comparable economies such as the Eurozone and Japan, according to new analysis from Capital Economics. This demonstrates the resilience of the UK economy, backed by strong fundamentals and interventions by the government. Such recovery will create a positive impact on the property market in the UK.

A Knight Frank report suggests UK output is anticipated to grow nearly 7 per cent in 2021 with innovation led cities, such as London, attracting significant capital. As such, for the first three months of 2021, Real Capital Analytics data shows that the UK was the number one destination globally for cross-border capital investment in the property market. 

The combination of high vaccination rates, restricted supply, and significant investor demand propelled UK house prices to a 10.9 per cent annual increase relative to May 2020, the most in nearly seven years, according to Nationwide’s House Price Index. This meant British housing achieved a record high house price of  £242,832 on average. Measures such as the stamp duty holiday, help to buy, and the mortgage guarantee scheme also continue to provide impetus to the housing sector. 

A key factor outlined in research by Knight Frank is the gravitational pull of innovation clusters such as Oxford, Cambridge and London for real estate investor demand. These innovation led centres are replete with structural resources and development including data centres, industrial, life sciences, and long-term infrastructure projects. The complementarity of these assets with rising GDP, investment, and employment serve to substantiate UK based property market strategies. 

Finally, supply of quality homes is another key driving factor of UK house price growth. This has been hampered by the emergence of new Covid-19 variants, an ongoing need for home-schooling, as well as uncertainty around restrictions on movement before the end of lockdown planned on June 21st. As these concerns are allayed, house price inflation is expected to cool to maintain stability in the housing market, with Knight Frank forecasting UK house prices to grow by 5 per cent in 2021.