With the rollercoaster that is Brexit being at the forefront of our UK headlines for the past couple of years, but accelerated in recent months, it is affecting numerous markets around the world, property investment is one of them – to a certain extent.
Since the referendum, domestic investors have been saying ‘oh I want to wait to see what’s happening with Brexit’, ‘I’m going to wait and see that everything is ok with Brexit’, ‘what are your thoughts on Brexit’ and so on..it has undoubtedly affected the sentiment in the market for UK investors in particular, not so much overseas investors who are less exposed to the media headlines and will analyse the market performance in terms of data.
However, experienced and sophisticated investors understand that now is one of the best times to invest in property. Yes, despite the news headlines, now is the best time to invest in property. Having said that, it doesn’t mean you should blindly go into any development or location, obviously you should conduct the normal level of due diligence, however, if you have the funds, find the right deal and do the research, now is a fantastic time to invest in the UK market.
Let me tell you why…
Developers at the moment are keeping prices attractive and offering incentives such as free legal fees, stamp duty paid on premium units and free furniture packs, many agents are also offering improved returns and cash-back incentives, all in an effort to encourage investment.
As soon as confidence picks up and everyone rushes back in the market, developers will increase prices and there will be a lack of incentives available, it’s a simple supply and demand process. Even outside of the new build investment sector, on the secondary market, sellers are taking low ball offers meaning buyers can snap up bargains, which will change when they have multiple offers for their property.
This really is fundamental to consider, now the market is low and you can secure attractive pricing. The name of the game (with residential/buy-to-let thus capital growth focused options), is to ultimately buy low and sell high, once the confidence returns to the market, demand will increase and so will prices.
Don’t just take our word for it, to expand on the above, look at what happened in the financial crisis, those who purchased in 2008/2009 have made a fortune. See below for the UK Average Property Values from 2005 to 2019 according to the Office for National Statistics – 20/03/19:
So even if there is a no deal, which is looking unlikely, and there is a dip in the market, the above shows how resilient and attractive the UK property market is. Values have increased dramatically over the past 40/50 years and it’s unlikely they will stop anytime soon. Given the price increases, yields, legal framework, transport, world-class sport culture, educational institutions, international corporate presence etc etc…the UK remains one of the worlds most attractive investment markets.
Furthermore, looking at regional cities, these have continued to grow since the referendum. People were saying in 2016 they want to wait and see what happens and have lost +12% in capital growth, and 13/14% in rental income over 2 years in the likes of Manchester, Liverpool, Sheffield etc, when you consider a +£150k purchase price this is a substantial sum.
The latest data from Hometrack (part of the Zoopla Group) of February 2019 still shows the substantial growth of the regional cities. Manchester, for example, has grown 5.8% on average in the 12 months leading to February 2019.
You can see from the above that London has been hit, growing only 0.4%, this is namely due to prime and super-prime London seeing a big slow down, the commuter belt locations are still attractive in most cases in our opinion, whilst also providing better value thus rental yields.
Alternative Asset Classes
All of the above was referring to traditional residential property. Another factor to consider is the other asset classes that are available to retail investors, sectors such as Care Homes, Student Accommodation, Hotels and even Financial Instruments such as Loan Notes. Contact us to discuss the pros and cons of your options, however, the point is that there are options that offer fixed income and a secure, defined exit strategy – contractually guaranteed, thus not having to rely on market conditions. We have seen a shift in recent months from high end off plan residential property for +£150k with a mortgage purchase, to lower entry level cash investments from £55-£90k, offering lucrative, fixed returns and resales, when you consider a 10% fixed return for 10 years, plus a 125% buyback from the developer, assured, then this demonstrates why.
As expressed earlier, it’s only the right time to buy if your personal circumstances allow, however, if you’re in a position to do so, It’s very clear to see that the pricing available currently is far more favourable than it will be in two/three years down the line. Even for investors executing a strategy focused on growth, regional cities in the North West are still performing exceptionally well. Don’t read into negative press headlines and construct your whole invest plan of attack around these. Decisions should be based on the merit, finances and data available on the specific opportunity – operate as a business would in your decision-making process, not based on speculation or emotion.
Contact us today by calling 0203 815 6654 or send us an email to [email protected] to discuss your investment strategy.