Since 2009, the value of UK housing stock has risen by £1.3 trillion (28%) with capital values heavily supported by ultra-low interest rates and increased mortgage lending. In this report, we look at the current residential market and how investors can capitalise on opportunities.

1. UK PROPERTY MARKET
RESIDENTIAL OVERVIEW
Essential Investment Information
MARCH 2016

2. UK RESIDENTIAL MARKET

3. Headline Statistics
• Average UK house prices rose by 0.3% in January and are up to
4.4% year-on-year
• Cumulative growth in UK prices is expected to total 20.3% in the
five years to the end of 2020
• Activity in the market has stabilised at around 100,000
transactions a month
• Capital values will continue to be supported by ultra-low interest
rates, which are playing a key role in capital markets
• The current ultra-low base rate alongside an increased appetite
for lending among banks has led to record low mortgage rates &
rising lending

4. 2016 Overview
Since 2009, the value of UK housing stock has risen by £1.3 trillion
(28%) with capital values heavily supported by ultra-low interest
rates and increased mortgage lending. As we move into 2016, rising
values are expected to continue after a positive 4.5% increase in
average house price value last year and forecasts for cumulative
growth sit at 20.3% for the five years to the end of 2020.
Increased competition in the mortgage lending market, stronger
economic growth, demand from cash-only buyers, and a relative
lack of appropriate homes for sale in the right locations, have all
contributed to the rise of housing value.
At Vesper Stone, we expect prices to continue climbing throughout
the year in-line with figures published in the latest House Price
Sentiment Index (HPSI) from Knight Frank & Markit Economics,
which have been above 50 for 35 consecutive months).
The strongest house growth remains in the more expensive markets
of London and the South East, however this has helped bolster the
total value of residential property overall by 6.7%. Neil Hudson,
Head of Savills Research, confirms London house price growth has
driven rising values across England and claims this marks the next
stage of the housing market cycle where price growth spreads
across the country in relation to underlying economic activity and
wage growth.
In January, NatWest reported that average UK house prices rose
by 0.3% taking the annual rate of growth up to 4.4%.

5. Private Rented Sector [PRS]
According to the latest English Housing Survey, the PRS has been
growing by 260,000 households per annum post the credit crunch,
with the Government tasked to deliver 400,000 new ‘affordable
homes for sale’ over the next 5 years to meet a growing population
and overstretched rental demand.
This equates to an annual delivery of 80,000 units, however it
does not meet the 220,000 new households needed per year over
the period.
The total value of UK PRS stock hit a record £1.29 trillion at the start
of 2016, equating to a 55% increase over the last 5 years and worth
over £500 billion more than it was in 2007.
This price growth is underpinned by ongoing difficulties faced
by first time buyers and second steppers, who simply cannot
accumulate sufficient deposits to get on or move up the housing
ladder. The average deposit for a first-time buyer rocketed to over
£25,000 in 2015, with mortgage regulation restricting borrowing
and homeownership among younger households increasingly
becoming the domain of the wealthy - in London, average
deposits rose to £75,000.
The political response to an inaccessible domestic buyer market
has been a combination of first-time buyer incentives and increasing
the tax burden on buy-to-let investors to reduce the competition
they face. However regardless of these measures underlying PRS
demand is set to continue to rise and Vesper Stone believe
buy-to-let to be a strong investment option.

6. Political Influences
With the UK’s membership of the European Union under
referendum vote in June 2016, investors are looking closely at
the possible impacts on the UK housing market.
The mainstream UK housing market is primarily driven by
domestic dynamics, therefore an exit from the EU would not affect
the demand/supply imbalance which is a key feature underpinning
current housing trends according to the March referendum
update issued by Knight Knox.
Both transaction volumes and development starts have grown
steadily since the initial Government pledge for a referendum in
2013, despite economic uncertainty due to unknown implications of
the vote.
This is a positive sign for investors, as it confirms that the EU
referendum announcement, so far, has not led to a slowdown in
market activity.
Further security in market sentiment can be found in the take-up
in the office market, reflecting confidence from employers around
longer-term economic conditions in the UK.
Figure 1: Housing Starts & Completions

7. OPPORTUNITIES FOR INVESTORS

8. Cash Rich Investors -
Looking at the current PRS landscape, Vesper Stone have identified three core opportunities in
the sector benefiting different types of investors; cash rich, seasoned and those requiring debt.
The greatest impact however, will be in private landlords’ ability to expand their portfolios as
the economics of buy-to-let evolve and lenders begin to adjust their borrowing criteria.
Seasoned Investors
and Landlords -
The PRS provides ongoing
opportunities for cash rich investors in
2016, particularly those caught by limits
on their future pension contributions
and those no longer obliged to take
annuity at retirement.
Both should look to rationalise
their portfolios by disposing of poor
performing stock to reduce their
mortgaged debt in order to maintain
sustainable buy-to-let cash surplus.
Future investment should be
targeted at lower-value higher-
yielding stock, avoiding markets
heavily reliant on welfare payments
for increased security on investment.
Those Requiring Debt -
This report is published for general information only and not to be relied upon in any way. Although high standards
have been used in the preparation of the information, analysis, views and projections presented in this report, no
responsibility or liability whatsoever can be accepted by Vesper Stone Limited for any loss or damage resultant
from any use of, reliance on or reference to the contents within.

9. Henrietta O’Donnell
Managing Director,
Vesper Stone Investments
Henrietta specialises in introducing exclusive UK property assets to
the Spanish expatriate community.
Her extensive knowledge of the UK property market means that she
can advise overseas investors of what, when and where to buy inline
with turns in market cycles.
For our latest analysis and views on the UK property market,
visit: www.vesper-stone.co.uk or our LinkedIn.

10. Sales Team
+44 (0) 203 488 0906
henrietta@vesper-stone.com
MARKET ENQUIRIES
To discuss UK investment options please contact:
+44 (0) 203 488 0906 | contact@vesper-stone.com
www.vesper-stone.com
We nor any of our associated companies, agents, employees or partners can be held responsible for any losses
incurred by any investment made by the purchaser or investor. The information contained herein is for information
purposes only and is based on the views and opinions of employees and research done by third parties. The
information contained herein should not be taken as legal or financial professional advice. It is recommended that
anyone considering an investment should seek financial advice from a third party before a decision is made.
The terms of any investment made by the purchaser or investor will be defined by the sales contract and leasehold
agreement agreed with each individual purchaser or investor. Where any terms may be or may seem contradictory,
the sales contract and leasehold agreement will take precedence over any terms stated in this brochure.