According to the Royal Institution of Chartered Surveyors (RICS), towards the end of 2022, house prices in England continued to decline. In its December survey, a net balance of -42% of respondents reported a decline in house prices which reflects a fall from the -26% that recorded a decline in November.
Other insights from the December 2022 RICS UK Residential Survey include that buyer demand is still falling, fewer sales are being agreed upon, and buyers are placing premiums on energy-efficient homes. The survey also predicts that the housing market will remain on this downward trend over the coming months.
According to a news report by City AM, the fall recorded in December was the highest recorded in 13 years as the fall echoed across all the regions in England. The survey also recorded East Anglia and South East as witnessing the sharpest rate of decline in net balance terms.
Nationally, the net balance for new buyer inquiries fell marginally from -38% in November to -39% in December which signaled a weak buyer demand across the UK. The survey also recorded a -23% net balance for the number of fresh property listings coming onto the sales market, the weakest recorded since September 2021.
The survey recorded a net balance of -41% in agreed sales across the UK, down from -36% recorded in November 2022. According to the survey, respondents from the North West of England, Scotland, Wales, and London all cited a quiet month of activity.
The survey also included a set of questions about how energy efficiency ratings impact buyer behavior. When asked if more buyers are expressing interest in energy-efficient homes, 40% of the respondents answered yes, but 60% said they did not see this trend. However, 41% of respondents noted that sellers were attempting to charge more for homes with a high energy efficiency rating.
In the rental market, there was a net balance increase of +28% for tenant demand. However, demand growth for rental apartments is slowing down, as the index has fallen to a level not seen since February 2021. The survey also reported a continued decline in new landlord instructions as a net balance of 24% reported a decline in December.
How Does This Affect Nigerians?
In the past two decades, the UK has become a property haven for Nigerians who need a hedge against inflation and currency depreciation. Nigerians owned 10% of all the properties purchased by offshore companies in the UK as revealed by the Pandora Papers in 2021.
As part of the aftermath of the Pandora Papers investigation, the UK enacted the Economic Crime (Transparency and Enforcement) Act 2022. The law requires foreign companies that own, sell or buy property to declare their beneficial owners, making it possible to check if these companies were acquired using funds from illegal activities.
Using the house price index of the Nationwide Building Society, it was estimated that property in Greater London worth £180,000 in Q1 2012 would be worth about £318,000 in Q1 2022 indicating an increase of about 76%. Factoring in an average yearly inflation rate of 3.82% and a cumulative price increase of 51%, the property will provide an ROI of about 25%. Figures like this portray the viability of investing in UK real estate.
In Nigeria, while there are no accurate property calculator indexes for different areas, Nigerian property prices are usually affected by the existing or expected economic situation in the area. Nigeria’s inflation rate between 2012 and 2022 averaged 12.37% yearly with a cumulative price increase of about 319.7%. The return is quite voluminous.
However, with the Naira also deflating by almost 400% between 2012 and 2022, investing in UK real estate generates far more returns for Nigerian investors than Nigerian real estate.