7 questions landlords and property investors should ask when considering property investment in 2017.
Why invest in UK property?
- UK is a proven stable and strong property market
- UK has a widely publicised housing shortage
- People understand property and home ownership
- The UK is considered internationally as a safe heaven
- UK property recovers well from downturns and was one of the first to recover after the 2007/2008 economic crisis
Given the new tax changes announced in April how do you think this will affect landlords?
Experience Invest’s research has shown that 85% of Brits are unaware of the new tax relief rules being introduced in April 2017.
When these changes take place, landlords will only be allowed to claim 20% of their tax relief, compared to the 45% they can claim now.
Changes to tax relief may push some landlords into a higher tax bracket.
Some people have suggested that landlords may increase rents to offset any potential losses however, our research has shown that the vast majority of Brits (86%) do not expect their rent to rise as a consequence over the next 6 months.
What do you think is the most unattractive part of investing in properties? Is it the management of the property and keeping it up to standard, for example?
The pitfalls in property ownership are usually…
- The cost in time and money of maintaining and managing the property especially if unforeseen expenses arise
- Exiting from a property and the time it can take to sell particularly in a downturn
- Paying for the mortgage in times the property is between rentals
Brexit has made some people nervous about investing in property in the UK, what would you say to these people?
In my opinion the fall in the pound after Brexit has attracted many overseas investors taking advantage of the favourable exchange rate, saving between 10% – 15%.
This is helping drive demand and inward investment in the UK.
With immigration restrictions looming some landlords think this will affect rental demand, but as the shortage of properties in the UK is so acute this is not likely.
So far the UK property market has remained buoyant in the face of Brexit and I can’t see this changing anytime soon as the current housing stock is not enough to satisfy home grown demand for property.
What do you think are the most sustainable types of property to invest in? Residential, commercial, or alternative property sectors?
The UK has a large housing shortage but certain types of properties are needed in specific areas. In general, it’s the location that will determine how sustainable the property is in terms of rental demand.
- Student Properties have tended to do well historically in all market conditions as the supply of purpose built Student Housing tends to not to meet demand.
- Build to Rent properties like high spec city centre residential apartments should be sustainable.
- Care Homesthe consistently increasing aging population and lack of specialist care and nursing homes mean that this property asset type is in very high demand. Also, the fact that nursing home or elderly property residential homes tenants pay a high rental amount means that this asset class can be operated profitably and therefore is very sustainable.
What areas in the UK are receiving the most growth with new developments for investing?
London the capital has always been a favourite with investors, however with the high cost of purchasing property in London rental yields tend to be lower.
This is why many investors are heading to other UK cities with lower property prices and higher rental yields.
This has led to the rise of the commuter belt towns. Towns like Luton, which has excellent transport links into the capital with relatively low property prices, is one property hotspot at the moment.
The Northern Powerhouse cites that are receiving massive investment and economic boosts are also property investment hotspots. Cities like Manchester and Liverpool are experiencing an influx of investment and with it properties in these areas are have become very attractive to buy.
What advice would you give to someone who is thinking about investing in property?
- Do your sums
- Make sure you have contingency funds in place for any unforeseen expenses and also void periods
- Do your due diligence on the property, the developer, the location and managing agents
- Ask as many questions of your chosen professionals and advisors
- Think about what you want to achieve both short term and long term. Are you investing for capital growth or regular rental income?
You can read more about the UK property market in out latest UK buy-to-let guide.