What Does a Stagnant London Property Market Mean?

London house prices aren’t exactly falling down, but they aren’t exactly rising either.  Statistics vary depending on timescale, source and the exact nature of the data, but overall the consensus of opinion is that, at the very least, the London property market is fraying at the edges.  So what does that mean in practical terms for investors?

Why is London’s property market slowing down?

In order to determine what to make of this situation from an investment standpoint, the first question to ask is: “Why is this happening in the first place?”.  There are several possible reasons and more than one could apply at once.  Let’s take a look at three of them and see what they mean for investors.

Brexit

Assuming that any slowdown in the economy is due to the prospect of Brexit may already be a cliche (or at least on the point of becoming one) but in this case, it may be a factor.  Home buying is a long-term commitment and if people are unsure of what is going to be happening in their lives over the next few years, they are more likely to put off major purchases such as houses.  Admittedly this applies across the country (and indeed the world) but London is arguably more exposed to Brexit than anywhere else in the UK due to it being the de facto headquarters of the UK’s financial services industry.

From an investment perspective – the population of London is over 8 million, the population of the UK is around 65 million.  In other words, about an eighth of the people who live in the UK make their home in London.  Barring any major shocks, it’s hard to see how this could change enough to sink the property market, which means that, over the long term, London almost certainly still has good long-term prospects.  It is up to individual investors to decide whether or not they want to commit to London for the long term or look elsewhere.

Competition from other parts of the UK

Back in the 1980s London had Margaret Thatcher, yuppies and power dressing, while the north of England had Boys from the Blackstuff, Educating Rita and Bread.  While this disparity made great fodder for comedy, it created tensions in real life and long before George Osborne formally kickstarted the Northern Powerhouse initiative, the government was using its influence to try to boost the northern economy.  Around 10 years previously, in 2004, the licence-fee-funded BBC announced its intention to move part of its production to Salford.  Fast forward to today and not only is the north of England going full steam ahead, it still has lower house prices than London, making it a very attractive destination for new companies, existing companies wishing to set up new operations and anyone for whom work is an activity rather than a place.

From an investment perspective – forget the “grim up north” jokes and take the north of England seriously as an investment destination, but remember to check any proposed investment thoroughly on its own merits before parting with your cash.

The “Olympic effect” is coming to an end

The 2012 Olympics fired the starting gun on a massive programme of regeneration in London, particularly east London and led to a huge rise in house values in certain parts of the city.  That was then, this is now.  The Olympic magic dust has settled and has become the new normal.

From an investment perspective – this is par for the course with any new infrastructure improvements, which is why astute investors tend to be interested in properties where infrastructure development is likely, but has not yet been factored into house prices.

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Why Developers Need to Prioritise Affordable Property

Mention the word “affordable housing” in the context of property development and the chances are that many people will automatically (and understandably) think of the requirement for (most) new developments to include a certain percentage of what is officially considered to be affordable housing. Let’s set this aside for one moment and focus on what the term “affordable housing” actually means, which is exactly what it says, houses people can realistically afford and the reason developers need to start prioritising this is because it’s the only way for them to maintain sustainable businesses.

Why the internet could put UK-based property developers out of business

Terms like “digital nomad” and “coffee-shop professional” may sound pretentious, but they reflect the way the nature of business is changing. There have been “home workers” throughout history, but as the world industrialised, the idea of “work” came to refer to a place as much as an activity. Now not only is it increasingly possible for people to work from home, but it is increasingly possible for that home to be far away from where their clients are based, even in another country. The digital economy, for example, is arguably truly global. Set against this backdrop, it is hardly surprising that digital workers and skilled professionals, particularly young ones, the famous millennials, will be looking at their options and asking themselves if they really want to stay in a location where they will be forever renters or move overseas to somewhere they can afford to buy. An exodus of young adults will ultimately be felt not just in the first-time-buyers market but later on in the market for family homes and then retirement properties. This may seem like a far-fetched scenario, particularly since Brexit may make it far more difficult to emigrate to another European country, but the reality is that many countries actually want to attract skilled talent, particularly younger adults.

Developers need to concentrate on delivering value rather than up-selling

Up-selling is key to many sales strategies and it’s everywhere, from online retailers who suggest purchases based on your browsing history to supermarkets placing “treat” purchases at strategic locations (particularly next to the tills). It’s also, often, part of the strategy for selling homes. Developers can add desirable features, anything from luxury finishes to steam showers and put a mark-up on them. This may actually deliver genuine value to the purchaser in the sense that even though the developer makes a profit on these items, the developer’s bulk-buying power can mean that it is still possible for them to deliver these niceties to the customer at a much lower price than the customer would have paid buying retail. At this point, however, the problem is that land values in the UK have driven house prices up to such an extent that potential buyers, especially younger ones, are being driven out of the market and, as previously mentioned, there is a strong possibility that this will result in some of them at least choosing to move overseas instead of staying in the UK.

Time for a radical rethink of the UK property market?

Sometimes when you appear to be up against a rock and a hard place (rising land values and other costs versus stretched buyers), the solution is to try something entirely different. For example, co-living spaces are popping up across the world and are currently making their mark in London. These are essentially spaces where residents have very limited private space, which is compensated by access to communal spaces and communal facilities. At current time, these are focused on the rental market, however in principle there is nothing to stop the idea being adopted for the sales market or adjusted to make it more suitable for families as well as those pre- post- or without children.

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Landlords Vs Limited Companies

Napoleon is said to have described the English as a nation of shopkeepers. If he were around today, he might describe it as a nation of small-scale landlords. In the near future, however, people might refer to the UK as a nation of corporate landlords as changes to the financial and legal landscape impact both the cost-effectiveness of being a private landlord and the level of personal risk involved.

Investment is about numbers

You buy a home to live in, but you buy an investment property to make you an income. In the most basic of terms, you work out the gross income you can generate from your property, you estimate your expenses, and you decide if the difference between these two figures leaves you with enough profit to be worth the effort involved. If circumstances change, you do your sums again and decide whether or not your investment is still worthwhile. Recent, well-publicised, changes to the tax system have the potential to be seriously detrimental to the net income generated by investment properties held by private landlords, i.e. landlords letting out property outside the framework of a limited company. The announcement of these changes led to a slew of articles both online and in mainstream publications, discussing the possible use of the so-called “landlord loophole”, i.e. the possibility of converting a property portfolio from a private holding to an asset belonging to a limited company. While this might be a good idea in theory, in reality, setting up a limited company can be an expensive and complex undertaking, so much so that small-scale landlords may find it more appropriate simply to sell up and find another investment vehicle.

Risk is also a factor

All landlords have to deal with three main forms of risk:

  • the risk of property being damaged
  • the risk of being sued for compensation for negligence
  • the risk of letting a property to a tenant without the “right to rent”

Even though the risks may be the same, how they affect landlords can be very different. While dealing with a damaged property may be the most obvious risk of being a landlord, it’s arguably the one which should cause the least degree of concern since it can usually be mitigated through a combination of tenant selection, deposits and insurance. The risk of being sued for compensation for negligence may be much smaller and again there are steps landlords can take to mitigate it (the obvious example of this being to take good care of their property), but in a world of “no win no fee” lawyers and adverts making people aware of the possibility of them claiming compensation for an accident which wasn’t their fault, the reality is that even the best landlords can find themselves on the receiving end of a claim from a tenant who has nothing to lose. If a private landlord is found negligent, they are personally liable for the damages, whereas a limited companies can only be sued to the extent of their assets. Likewise, while the “right to rent” scheme applies equally to both private and corporate landlords, the former may find it much harder to navigate the complexities of the scheme in a non-discriminatory manner.

The end for private landlords?

While it’s still relatively early days and the attraction of owning property in the UK should never be underestimated, it is fair to say that the government’s actions have the potential to push private landlords out of the market. Smaller private landlords may well just liquidate their portfolio and move on, while larger ones may become limited companies. What’s more, the government has committed to abolishing letting agent fees for tenants, which presumably means that letting agents will charge landlords instead. While, in theory, this should be a situation which is six to one and half a dozen of the other, private landlords who are already seeing their returns dwindle and their risks increase (due to the right to rent scheme) may decide that enough is enough.

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Housing Needs For The Forthcoming Year

The snap election seems to have taken many people by surprise, including, it would appear, the Prime Minister who called it. Having been deprived of her last minister for housing, Gavin Barwell, who lost his seat, she has recently appointed a replacement in the form of Alok Sharma. Given that he is the 6th housing minister to be appointed in roughly as many years (since 2010), it is an open question as to how long he will stay in post, but assuming he makes it to this time next year, what are his priorities likely to be?

Housing refurbishment

While many newspaper headlines have been devoted to the overall shortage of housing and the corresponding difficulty of “getting on the housing ladder”, the tragic events at Grenfell Tower have brutally highlighted the fact that some of the UK’s existing housing stock is in drastic need of refurbishment. What form this will take will depend on just how bad its condition is. In some cases, it may be possible simply to update and upgrade existing buildings. In other cases, the only realistic option may be to demolish the existing structure and start again.   In either case, it is very possible that the high-profile nature of the Grenfell Tower fire will mean that the refurbishment of existing properties goes to the top of the political agenda.

Home-building

The Conservative manifesto promise was to build a total of 1.5 million new homes by 2022, of which 1 million were to be delivered by 2020 (this total including houses built as a result of actions taken by the last parliament). It will be interesting to see whether or not the Conservatives will be able to make good on this pledge. The simple fact of the matter is that government support for home building is dependant upon tax revenues and the uncertainty around Brexit may make it rather difficult to forecast how many people are going to be in the UK to pay taxes, let alone how many of them will be in work and what level of tax they will pay. Added to this, there is a large question mark hanging over the availability of labour for the construction industry, which has long relied on trades people from eastern Europe, which makes it difficult to predict the cost and schedule of housing projects and that is without taking into account the fact that the weakness of Sterling may well continue for the foreseeable future and while this is good news for exporters (and inbound tourism), it is bad news for anyone who needs to import either materials or labour (or encourage labourers already in the country to stay here instead of taking their skills elsewhere). Notwithstanding all this, it is to be hoped that the government will do all it can to support home building as the UK has long suffered from a shortage of housing stock.

Improving the situation for renters

Previous housing minister Gavin Barwell pledged to ban lettings agencies charging fees to tenants. This change has yet to be implemented, although given the amount of press coverage it received, it would probably be politically-challenging for the Conservatives to reverse the decision. While this pledge was welcomed by tenants, landlords and lettings agencies commented that any fees charged to landlords would have to be passed on to tenants. Those in favour of the change, countered that this does not appear to have been the case in Scotland. This, however, is a bit of an open question. Rents have risen in Scotland since the ban on letting agent fees (to tenants) was introduced in 2012 and although a 2013 study found that only 2% of landlords raised rents specifically because of this, it is still entirely possible that the change factored into the calculations of the other 98%. Ultimately the issues in the rental market reflect overall lack of supply and the only meaningful way to address this is to improve the supply, for example by encouraging build-to-rent schemes.

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Why Brexit Might Not Be That Bad

It’s official (almost), the wheels have been set in motion to trigger Article 50 and start the process of taking the UK out of the EU. Understandably, there has been a great deal of media coverage about what this will all mean and while, on the one hand, the future is anybody’s guess, on the other, when trying to determine what will happen, it’s often helpful to look at the fundamentals.

Fundamental 1 – London is a property market apart

London is home to the city, which has been quite open about its concerns regarding leaving the EU. Other European cities have also been quite open about their desire to lure businesses away from their London bases. There are, however, a number of reason to refrain from panicking about a property crash in London, for example:

1 – While it would probably be painful for the city to lose access to the European market, it has global reach so it is highly doubtful that the blow would be terminal.

2 – Even though London and the city are often spoken of as though they were one and the same, in actual fact there is far more to London than the city. The creative industries are one obvious example of this, as is the fact that many digital technology and other “disruptive” companies, have chosen to make London their base. These cover a broad scale from industry giants such as Apple, to niche start-ups. In principle, these companies could be lured away by other cities with equivalent infrastructure and continued access to the single market, however in practice there are a number of reasons why they should stay put.

3 – The UK has a very flexible labour market including a thriving freelance economy, which is great news for companies who need to get work completed but want to avoid the commitment of taking on employees (at least until they have a clearer idea of where they stand). It also tends to be at least relatively accommodating of disruptive business models. Paris, by contrast, has been locked in a battle with tech giant Amazon, which is unlikely to have passed unnoticed by any technology companies who may have been approached about moving there.

Fundamental 2 – The UK is an attractive export market for other countries

While some pundits have speculated that certain EU members may be prepared to sacrifice their own export potential in order to make an example of the UK and deter other countries from leaving the bloc, it’s a wide open question as to whether this would be a feasible ploy in real-world conditions. In simple terms, such an approach carries the risk of causing job losses and this may go down badly with the (voting) public. Even if such a scenario did occur, it is highly likely that other countries would look to fill the gap, which would create reciprocal export opportunities for the UK. This is important for the post-Brexit outlook of regional economies which are based on agriculture and/or manufacturing.

Fundamental 3 – Long-term value will always attract investors

While the weakening of the pound makes it more expensive to import raw materials, it also means that anything priced in sterling becomes more affordable in real terms to international buyers. This includes finished goods (for export), shares in UK-based companies and, of course, property. The fall in the value of sterling could, therefore, help to provide a short-term boost to the UK economy during and after the Brexit process. Over the long term, it is a reasonable expectation that as the UK economy stabilises, the value of sterling will rise again until it is, eventually, back to its pre-Brexit levels.

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It’s Not Grim Up North

Data from peer-to-peer lender Kuflink shows that rental yields in the North of England and Scotland have been comfortably beating rental yields in London at 4.3% and 3.2% respectively. While this is, of course, interesting news for (potential) buy-to-let investors, it’s still useful market intelligence for those who prefer to avoid the politics of buy-to-let and invest in the property market through other channels, for example property development.

Takeaway point 1 – There’s a difference between price and value

London and the South East is an expensive place and hence landlords are likely to be able to charge higher rents than they would for equivalent properties in other parts of the country. The flip side of this, however, is that buying the rental property is likely to have cost them more than an equivalent property in another part of the country. There are still plenty of reasons why the Thames Valley area could be a good place to invest in property in some way, but it’s worth remembering that there is strong demand for property in other parts of the UK as well and hence opportunities for investors.

Takeaway point 2 – It’s always worth looking out for up-and-coming areas

According to Kuflink, Manchester and Salford provided rental yields of 6.7% and 6.6% respectively whereas Cambridge was a mere 2.7%. The data did not analyse why this was so, but one very feasible explanation is that Manchester and its neighbour Salford have both been in a process of regeneration over recent years, with the BBC making news itself by moving some of its production to Salford back in 2012. The availability of work attracts people to an area, particularly young adults, for whom renting is likely to be the most appropriate option, even if they have the funds to buy. The combination of relatively low house prices (compared to London) and increased demand for rental properties makes for good rental yield. It also offers good opportunities for other forms of property investment since many of the people who arrive as renters will ultimately settle down and buy property in the area. Cambridge, by contrast, is a mature market. As a University town, it has a pretty much guaranteed market for rental properties and as a research centre it also has a demand for property to buy, but there is nothing new about any of this and so the opportunity to invest at the start of an upward trend is really long gone. The North of England and Scotland have both been benefitting from improved infrastructure (particularly transport links and broadband internet) and as they are outside the “city” zone, they have less reason to be concerned about the prospect of some financial service roles being moved out of the UK due to Brexit.

Takeaway point 3 – Quality matters

The fact that in the UK there is always a strong demand for housing is hardly a secret and a quick scan of a newspaper website will probably reveal plenty of articles about landlords and home builders taking advantage of desperate renters or buyers. While there is certainly an element of truth in this, the simple fact is that the fundamentals of business also apply to the property market, even though it generally moves at a slower pace. Companies (or individuals) who supply shoddy goods and/or poor customer service may make a quick short-term profit, but over the long term they tend to get found out and weeded out. Because of this, anyone looking to make meaningful, long-term returns from property, whether that’s as a landlord or as an investor in property development, is well advised to be very selective about their purchases and only put money into high-quality builds.

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How Will Stamp Duty Affect Buy To Let?

April 2016 saw the introduction of a 3% stamp duty levy charged on purchases where the purchaser already owned a property. There were a few exceptions to this and certain circumstances in which the levy could be refunded (e.g. if people were moving from one property to another and only had two properties temporarily). Buy-to-let landlords, however, essentially pay 3% more for a property than a first-time buyer would.

The Theory

Home buyers and buy-to-let landlords are in direct competition for properties. Competition increases prices and higher-priced houses require larger mortgages and hence higher incomes and bigger deposits. If higher house prices mean that people are unable to afford to buy, then these people are, effectively, forced to rent and as renters they have to pay their landlord while saving for a deposit. This puts them at a disadvantage in the property market. The 3% surcharge is, therefore, intended to level the playing field.

The Reality

Given that the 3% surcharge was introduced just a few months before the Brexit vote, with all the turbulence that has caused, it is difficult to impossible to determine what specific impact the surcharge has had by itself. What is, however, possible, is to look at recent history and see what indicators it may give for the future. Home ownership has long been a central plank of government strategy (at least since the days of Margaret Thatcher). Over recent years, various governments have introduced a range of schemes to make it easier for first-time buyers to get on the housing ladder. These have included: shared ownership, equity loan, mortgage guarantee and the help-to-buy ISA. For want of a better term, these schemes can be seen as carrots to help home buyers. The government’s new stamp duty surcharge, therefore, can be seen as a stick with which to beat BTL landlords. The fact that the government is now using sticks as well as carrots raises the question of what other action might be taken to make life more difficult for BTL investors if the current measures fail to have the desired effect.

Moving Forward

The BTL market, for the moment, still seems very much alive and well and there has already been extensive discussion about the action(s) landlords could take to minimise (or eliminate) the effect of these charges. Suggestions have varied from passing the costs on to tenants to moving properties into a limited company, whereupon different tax rules apply. The challenge facing BTL investors is that if they find themselves locked into a battle with government policy any move they make, even if it is legal at the time, can be rendered ineffective at a later point through a change in the law or the tax system. On the one hand, there are many reasons why the BTL market could and should offer attractive returns in a country like the UK, on the other hand some investors may be feeling uncomfortable about the prospect of being in the government spotlight and may be looking for alternative ways to profit from the UK’s thriving property market.

Is property development the new BTL?

One point on which there is broad consensus is that building new homes is crucial to the UK’s future, partly because the population is increasing and partly because existing, lower-grade housing stock needs to be replaced. Because of this, high-quality property development is actively encouraged, for example, the 2016 autumn statement included a specific commitment to building new homes. Hence investors who want to enjoy the returns from property without the risk (and effort) involved in buy-to-let, might find investing in property development is the perfect solution.

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5 Ways to Invest £50,000

It’s been a long time since savings offered any sort of meaningful return, which means that those who wish to grow their cash need to look at alternatives. With that in mind, here’s a look at where you could put a £50K investment.

The Stock Market

The stock market is a big place and the companies in it perform very differently, which is understandable given that the term “the stock market” includes everything from high-tech start ups to established blue-chip companies with little in the way of growth in their share prices but great dividends. This is why there is generally at least one stock-market investment to suit anyone of any age, appetite for risk or preference for capital growth versus income yield. The stock market can provide good returns, investors just have to place their money with care and accept the fact that both individual companies and the market in general can go down as well as up.

The Property Market

The property market has long been popular with investors seeking good returns on their money with minimal risk. There are some places where £50K could buy you a feasible buy-to-let property although you might need to budget a little extra on top for sales costs, e.g. surveys, but realistically in most parts of the country and for most properties, £50K is a deposit, albeit a very substantial one in some locations. On the other hand, buy to let has become something of a contentious topic over recent years and landlords have become an easy target for government revenue collecting, with changes to stamp duty and mortgage tax relief both benefiting the exchequer at the expense of landlords. Little wonder, then, that even though BTL remains popular, some investors are looking at alternative options.

For example that same £50K could be invested in a property development thereby benefiting from property without the hassle of managing tenants and properties within the law. Obviously this is an area in which we may seem to be biased but the ROI specks for itself and with a UK investment you can literally see your investment developing..

Invest in Companies Which Qualify for Business Property Relief

This is an option which may have particular appeal to older investors, since these investments are excluded from inheritance tax calculations after two years of ownership, whereas gifts need to be given at least 7 years prior to the individual’s death to qualify for full IHT exemption. In addition to this, the holder can continue to benefit from their interest in the company up to the point of their death, whereas they must give up any and all beneficial interest in any gift they give for it to be exempt from IHT. At the same time, however, it is usually best if the investment in question actually makes sense as an investment rather than simply, or even, primarily being a means to reduce IHT liability.

Given that companies which qualify for BPR are, by definition, small and are particularly likely to be family-run firms or start-ups, finding the right vehicle for your money can be complex. You also have to remember that as firms grow, they can stop qualifying for BPR although in this case, you may seal in a profit by selling your investment (or indeed choose to hold on to it anyway).

The State Pension Top Up Scheme

If you have already reached state pension age, you have until 5th April 2017 to make a lump-sum contribution to get as much state pension as you possibly can for the rest of your life. How much this will costs depends on various factors, particularly your age and the amount of extra pension you want to receive. The clock is now ticking on this one, so you’ll need to make a quick decision as to whether this option is for you.

As with all investments it’s best to seek financial advice and always bear in mind the caveat that investments can go down as well as up!

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Is It Time To Give The Markets A Break And Change Your Portfolio?

Over recent times, market-watching has been an educational activity for those with a strong stomach. World affairs (Brexit, the U.S. election…) have sent them plunging down only to start working their way back up again. With that in mind, here are 5 alternative investment options for those looking to give their portfolio a new year refresh, listed from the most sensible to those which are really more about having a bit of fun.

Property

Property is generally a stable investment in every sense of the phrase. This is particularly true in countries such as the UK where there is not only a high population density and an acknowledge lack of housing in general, but also a need to replace existing low-grade and/or dated housing with housing which is suitable for modern requirements. There are various ways to invest in the property market, of which buy-to-let is probably the most visible, but alternatives such as investing in property development can give your portfolio the benefit of exposure to the housing market without taxes, landlord involvement or a property to sell should you want a shorter term investment.

Peer-to-Peer Lending

Banks essentially take deposits from savers and lend them to borrowers taking a percentage for themselves along the way. Thanks to technology, peer-to-peer lending allows individuals to cut out the middle-man (or at least change their nature) so that lenders and borrowers can both get better rates. Of course, if you put money in a bank then, in principle it should be absolutely safe (although only deposits of up to £75K per bank benefit from an FSCS guarantee), whereas, as a lender, you accept the risk of default. Having said that, the role of the P2P platform is to screen borrowers and assign them risk categories, so lenders can make informed decisions.

Crowdfunding

Probably the most famous crowdfunding site of them all, at the moment, is Kickstarter, but this is unlikely to be of any great interest to investors since at this time Kickstarter explicitly forbids funders being given shares with financial value, instead they are given gifts to show appreciation. There are, however, other sites which do allow investors to receive shares. The key point to remember with this type of investment is that it tends to be high-risk/high-reward. These companies often have a serious risk of failure, in which case, there is a strong chance you will lose your money. If they succeed, however, you could be hugely rewarded.

Gold and silver coins

This is a hybrid of investing in collectables and investing in precious metals. Investing in collectables can be both fun and profitable, especially if you’re collecting something which really interests you. Precious metals have an obvious, long-term appeal. If you go for collectable coins in silver and gold then you will have the physical quantity of the precious metal, plus the chance that the coin itself will acquire collectable value or that its collectable value will increase.

Premium Bonds

If interest rates were higher, premium bonds would be a horrendous place to park your money, but at current time, savings accounts and ISAs are offering pitiful returns and current accounts are places to hold your money for easy access rather than to grow it. So even though premium bonds have the same disadvantages they have always had, namely they pay zero interest and your chances of winning anything at all, let alone any significant amount of money, put them into the category of having a flutter rather than serious savings or investment, today’s low-interest-rate environment makes these points much less significant than they used to be. So if you need somewhere to park your cash over the short term they could be a reasonable option and, you never know, somebody has to win.

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What should you consider before investing in property?

Keeping part of your wealth in property has become almost an investing axiom over the years and there are many good reasons for this. Having said that, there are generally exceptions to every rule of thumb, so here are some points to consider before you decide whether or not to invest in property.

  1. Does property investment fit into your overall financial/life goals at this precise point in time?

The idea of investing for the long term applies to a wide range of investments and it is generally critical to the success of property investment. If you are currently in an uncertain period of your life, for any reason, then it may be best to wait until you have a clearer picture of where you are now and where you are likely to be going forward before you make a commitment to any kind of property investment.

  1. Are you prepared to accept the fact that the property market moves at a relatively slow pace?

Some forms of investment, such as shares, can literally be bought and sold at the click of a mouse. Property investment is often different. Even high-quality and desirable property, which is clearly in the right area, takes time to buy and sell, if only because of all the legal boxes which need to be ticked. With other forms of investment, it can be perfectly feasible to sell one form of investment quickly so as to have funds readily available if a better opportunity presents itself. With property investment, astute investors have to be prepared to adapt a strategy which is suitable for the slower pace of the property market and either always keep funds available so as to be able to act quickly when new opportunities arise or be willing to plan changes well in advance.

  1. Is property investment actually a topic which interests you?

This may seem a strange point, since the aim of investment is to make money and, depending on the aim and strategy of the individual investor “dull” investments such as bonds and blue-chip shares can be far more appropriate than more “exciting” investments such as technology start-ups. In reality, however, successful investors need to have an understanding of their investment area(s), whatever it/they are. This means being prepared to spend time on research both prior to making the initial investment and, on an ongoing basis, to ensure that the investment(s) continue(s) to be appropriate to their needs and wants. Doing this research is likely to be much more enjoyable if property investment is something you actually find interesting.

  1. Do you want to focus on capital gains or yield?

As an investor, you might want to have both, in fact that’s perfectly understandable, but you can only make one of these your primary focus, so you need to decide which it is. If your strategy changes at a later date, then you can always adjust your investments accordingly. If you are going for capital growth, then you are likely to find yourself looking at different kinds of investment properties than those who are mainly interested in yields. For capital gains you may well find yourself looking at property in up-and-coming areas and/or property in need of substantial refurbishment or with legal challenges such as short leases. For yield, you are more likely to be looking for property in areas which meet certain criteria in terms of quality of life and which have the demographics which interest you, be that students, families, international professionals or retirees. You may also be more interested in quality new build property, since it will come in liveable condition and will also come with a builder’s guarantee, for an additional level of reassurance.

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