Capital growth is one of the most fundamental aspects of UK real estate investment. The term relates to a property’s increasing value over time. Capital appreciation is the price difference from when you purchase a property to when you eventually decide to sell it.
Numerous factors can influence capital growth. For instance, market trends will affect property prices. 2023 was a subdued year for property investment due to high inflation and elevated mortgage costs. As such, capital growth was very shallow. However, once activity picks up, property prices should rise faster.
Also, if you purchase a property in a regeneration hotspot, you may see capital growth accelerate over time. This is because the area has become a more desirable place to live while you own the home due to investment in local businesses and infrastructure. Therefore, many investors like to purchase properties in areas on the cusp of a regenerative boom.
One is the Baltic Triangle in Liverpool – a former hinterland that has become one of the trendiest places to live in the UK.
However, investors need to remember that capital growth is a long-term venture. It may take many years to see a substantial asset value appreciation. As such, landlords with short-term investment strategies may become impatient waiting for their property to realise its capital growth potential.
In addition, property investors may want to keep abreast of capital growth forecasts from industry experts – this will help you narrow your property search to areas with better-value properties with serious capital growth potential.
For instance, the Savills Residential Property Market Forecasts are one of the most authoritative predictors of capital growth for every region in the UK, providing five-year outlooks for the country’s property market. The most recent Mainstream Capital Value Forecast suggested that the UK would see capital growth of 17.9% by 2028, while regions like the North West and North East would see more significant growth than the national average.
