Investing in property is something that many hope to achieve. The richest people in the world all have one thing in common. They all own property and not only that, they own it across the world.
If you’re new to investing, you may be wondering where and when is best to invest.
The US is one of the most powerful economic forces in the world, but as of 2022, it was recorded that roughly 40% of Americans own their properties, and just 10-15% of the population own an additional property as a landlord.
For long-term investing, property can provide secure capital appreciation, in both the UK and the US. On the other side of the pond, roughly 53% of the population has been noted to own their homes, with just 10% of households owning more than one property.
As a whole, Americans invest more and have more sector diversity than UK citizens, but owning property is considered the standard in the UK with more people prioritizing property as an investment.
So which market is more lucrative? And why might a US citizen consider moving finance over to the UK, and vice versa?
Let’s get into the ins and outs of the UK VS US property market.
What is Happening Within the US Property Market?
The US property market is renowned across the world, known for its size, diversity, and rapid fluctuations.
With vast differences in housing trends across states, cities, and even neighborhoods, the market can be highly dynamic, and sometimes hard to stay on top of. In the last few years, rising mortgage rates and inflation have returned to baseline demand in certain areas, particularly in high-cost urban markets.
However, known investor-friendly states such as Texas and Florida have remained strong, attracting property investors due to their lower taxes, fewer regulations, and higher rental yields.
The rental market has also seen an increase in demand due to affordability concerns among homebuyers. This has driven up rental prices in many cities, making real estate investment an attractive option for those looking for a hands-off, passive income.
The US market also benefits from multiple financing options, making property ownership more accessible compared to other countries.
And the UK?
The UK property market has long been considered a safe and stable investment, particularly in London and the South East. However, recent economic changes, including Brexit-related uncertainties and rising interest rates, have impacted property values and rental yields in some regions.
The UK has also seen increased government intervention, including policies such as higher stamp duty on additional properties and stricter rental regulations, which can influence investment decisions.
Despite these obstacles and unanticipated changes, the UK remains a lucrative option for investors, especially those seeking long-term capital appreciation. Cities such as Manchester, Birmingham, and Edinburgh have emerged as hotspots for property investment due to growing populations, strong rental demand, and government-backed regeneration projects.
In addition to these great benefits, UK real estate investment trusts (REITs) provide another avenue for those looking to gain exposure to the property market without direct ownership.
The Average Property Prices in Both
The average property price between both countries varies exponentially, with the US having separate economies between each state with average housing costs falling within each end of the scale.
In the US, as of 2023, the median home price stands at approximately $400,000, but this varies widely depending on the state. Coastal cities like New York, San Francisco, and Los Angeles are subjected to much higher prices, whereas more affordable housing can be found in the Midwest and Southern states.
In the UK, the average house price sits around £290,000 ($375,000), with London being the most expensive area, where average prices exceed £500,000 ($600,000). The North of England and Scotland, however, offer much more affordable investment opportunities.
There you will find much stronger rental demand, in addition to opportunities for home conversions to add value, or change the use of a property to commercial or vice versa.
How Often Are New Homes Being Built?
One of the key differences between the two markets is the rate of new home construction. In the US, homebuilding is a major industry, with an estimated 1.4 million new homes built annually. The availability of land and lower density regulations in many states allow for large-scale developments, helping to meet demand and keep housing prices relatively stable in certain areas.
On the other hand, the UK faces a chronic housing shortage, with new builds averaging around 200,000 per year, which is far below the demand required to meet housing needs. Strict planning regulations and limited land availability contribute to this shortfall of housing, leading to long-term price appreciation in many parts of the country.
This scarcity makes UK property an attractive investment for those looking for steady capital growth, and providing much demanded housing for the population.
Is It Worth Investing Overseas?
For investors considering diversifying their portfolios, investing overseas can be a lucrative strategy. UK investors may find the US market appealing due to lower entry costs in certain states, higher rental yields, and more flexible financing options.
Meanwhile, US investors might be drawn to the UK market for its long-term stability, strong rental demand, and high potential for capital appreciation, especially in major cities.
That said, overseas investment comes with challenges, including currency fluctuations, tax implications, and differences in property laws. It’s essential to conduct thorough research and work with local real estate professionals to navigate the complexities of international property investment successfully.
Investment Strategies to Consider in the UK
If you’re considering investing in UK property, here are some key strategies to explore:
Buy-to-Let Properties – BTL properties are a common investment for those looking for a slow and safe return on their investment. Rental properties are particularly in high-demand cities like Manchester and Leeds, where many of its residents can not afford to buy outright. Often you can find BMV properties in these areas, and add value that offers returns of up to 10-20%.
Student Housing Investments – University cities such as Liverpool and Nottingham offer strong demand for student accommodations, often with higher yields and increasing demand. There are strict planning regulations that are required for student housing, with HMOs (houses of multiple occupants) facing more and more resection each year.
Flipping Properties – Buying, renovating, and selling properties can be profitable in areas where housing demand outstrips supply.
Commercial Real Estate – Offices, retail spaces, and industrial units can provide stable income streams, particularly in growing business hubs.
REITs and Crowdfunding – These options allow investors to access the UK property market without the need for direct ownership, providing diversification and liquidity.
Final Thoughts
Both the US and UK property markets offer profitable opportunities and challenges for investors. The US market provides diverse investment options with generally higher rental yields, while the UK market is known for its long-term capital appreciation and stable demand. The best choice for you will depend on your risk tolerance, investment goals, and willingness to navigate foreign real estate landscapes.
Remember to consider all of your options, and be sure to diversify your investments. Putting all of your eggs in one basket imposes greater risk, be smart and concise!
