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Insight & Opinion

How alternative property assets can boost retirement income

Author: Gemma

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Alternative property assets

It’s true the UK property investment sector has faced its fair share of challenges in recent years however, alternative property assets are offering investors a steady path forward.

In April 2017, the government began the phased removal of tax relief on interest payments for buy-to-let mortgage borrowers. During the 2019-20 financial year, landlords will only be able to deduct 25 per cent of their mortgage interest payments from their rental income for tax purposes, although 75 per cent of payments qualify for the new 20 per cent tax credit. From April 2020, the previous tax relief system will be removed entirely.

Many investors will also have been affected by the higher rates of stamp duty introduced in April 2016 for anyone purchasing a property in addition to their main home.

On top of these major changes, Brexit has caused a lot of uncertainty for the property market and the British economy as a whole in recent years.

Despite all these challenges, the real estate sector has continued to show stable and consistent performance. For people approaching the end of their working years, property still offers a lot of potential to achieve valuable returns to boost retirement income.

Some of the biggest gains can be made in alternative property assets such as student accommodation and hotel units.

The appeal of student accommodation

One of the key benefits of student accommodation investment that makes it a good option for people looking to supplement their retirement income is its potential to deliver consistent, reliable returns.

The UK’s prestigious universities and colleges hold powerful appeal for students throughout Britain and all over the world, which means owners of purpose-built student property in desirable locations can expect strong tenant demand.

Encouragingly for investors, recent uncertainty caused by Britain’s pending exit from the European Union doesn’t appear to have dampened interest in studying in the UK.

In a recent update on the student housing market, Knight Frank highlighted a positive long-term outlook for student numbers in the UK. Demand from international applicants remains strong, while changing demographic trends are expected to strengthen domestic interest in higher education.

James Pullan, global head of student property at the firm, acknowledged that the level of future demand will partly depend on decisions surrounding Britain’s relationship with the EU.

“The medium and long-term picture, however, remains bright, underpinned by positive demographics and the recently announced International Education Strategy,” he added.

Announced in March 2019, the International Education Strategy aims to boost the number of overseas students studying in the UK by more than 30 per cent. This is particularly good news for owners of purpose-built student housing, as international applicants are often willing to pay a rental premium to secure the additional benefits of this sort of accommodation, such as 24/7 security and close proximity to the university campus.

Another major advantage of student property investment for retirees is that it is not affected by the same stamp duty requirements as the residential housing market, which makes a big difference to purchase and mortgage costs. The same can be said of the hotel sector.

Hotel investment opportunities

The UK hotel market is another source of exciting prospects that could provide many opportunities for investors to bolster their income in retirement.

Like student accommodation, the hotel sector offers significant stamp duty advantages for buyers. It is subject to commercial rates, which means there is no stamp duty to pay on suites such as those on offer at Liverpool’s Epic Hotel and Residence.

The industry as a whole is in a strong position at the moment, with the Hotel Britain 2019 report from business advisory firm BDO showing that UK hotels have now experienced nine consecutive years of growth. Occupancy levels have reached a record high, despite the ongoing questions around Brexit.

Based on a representative selection of 649 hotels, comprising 53,912 rooms, the report showed a new record occupancy level of 76.9 per cent for regional hotels.

The strongest growth in room yield – an increase of 12.4 per cent – was recorded in Liverpool, a rapidly growing and increasingly diverse city that is offering a huge range of opportunities for property investors.

Some 37.8 million people visited the UK in 2018, and this figure is expected to increase by one million in 2019. This growth will provide vital demand for the industry and fuel consistent yields for investors who are using assets in the hotel sector to boost their retirement income.

If you want to find out more about alternative property assets for sale, get in touch with Experience Invest to discuss your portfolio.

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