Housing is in high demand. In fact, the demand for housing has never been higher. Between 2014 and 2015, the population increased to around 65.1 million -an increase of 500,000 in just 12 months1. If the population continues growing in this way, then it will go over 70 million people by 20262 – and they’ll all need somewhere to live.
It’s also likely that homes with just one person will increase by 159,000 per year, leading to a UK that will be the most densely populated country in the EU3.
Rising housing demand in the UK
To keep up with demand, the government has predicted that at least 232,000 new homes need to be built in England every year4. However, as it stands, in 2017 we’re building fewer homes than any other period since the 1920s.
Due to the constant demand for housing, property investment is often seen as a safer investment than other asset classes (such as stocks and shares). While the economy can and does affect housing prices, for medium and long-term investment, it’s the safest asset class.
Different ways to invest
There are many different ways you can invest, ranging from converting your current residential mortgage to a buy-to-let mortgage to investing in a property fund.
We cover all the common ways to invest in this guide to help you decide which would work best for your investment goals.
How do you make money from property investment?
There are two main ways to get a return on your investment:
- Making money from rent by letting out your property to tenants
- Selling the property in the future at a higher price
If you don’t want to go all in and buy a property by yourself, you can invest into a fund that then invests into a property. There are also property maintenance services and management services that you can invest in.
Ten reasons why it’s a good idea to invest in property
- 20 per cent of the UK population will rent by 20235
People are increasingly being pushed out of the housing market, leading to a rising demand for rental property. Since 2002, this demand has just about doubled, with rental properties now forming 11% of housing stock. With record levels of population increase, buy to let is the perfect way to invest.
- Bricks and mortar always will be ‘safe as houses’
Like all clichés, ‘safe as houses’ has a ring of truth. Investing in property will always be a robust investment class, particularly for investors looking long term. Despite an unstable political situation in the UK, the world’s economy frequently reeling from world politics, and an uncertain foreign policy, investing in property remains the safest bet.
- It’s simple to get started
Unlike with other investment asset classes, you don’t necessarily need specific knowledge to begin your property investment career. Often, it takes an increase on your own property to give you the boost you need to look further into this way of making money. There is an entire industry of help, advice, brokers and consultants to help private investors make the most out of their money.
- It’s easier to understand than stocks and shares
Sure, if you have the time and inclination it’s possible to learn enough about investing in stocks, shares and bonds. But there’s no doubt at all that it’s not easy to understand the complexity of the trading world, and it takes a lot of time, energy and dedication. Investing in property, by contrast, can be more easily understood with some simple online research and judicious advice.
- It’s relatively simple to get financed
Generally, lenders like to lend for property investment, whether that’s a mortgage or another form of investment. All banks offer mortgages as a main part of their business model, and they are always more likely to lend on residential property than other assets. They will generally lend a much higher proportion of the value of the property and at much lower interest rates than other asset classes, including commercial property.
- Leverage can help you
Using property, instead of a share portfolio as security, means you can borrow more money. Lenders will typically allow you to borrow up to 95% of the property value, but will only go up to around 60% on the value of shares. If you can borrow more money, then you can benefit from the capital growth of the asset. The greater leverage is one of the most compelling reasons to invest in property, rather than stocks and shares.
- Property investment is your flexible friend
There are many different investment strategies, so you should be able to find one to fit your goals. Depending on whether you’re looking for a cash injection in the near future, or want to build a reserve for retirement, you might consider anything from long-term capital growth or positive cash flow to adding value.
- Control is yours
While you may well use a broker to start with, or get advice from professional financiers, when the property is finally owned by you, you have complete control over it. Assuming you stick within the bounds of your mortgage, lending stream and planning restrictions you can then choose where you go. Raise the rent to improve cash flow, or add value by improving the property. This just isn’t possible when you have invested in shares in a company.
- Overseas investors can take advantage of the 30 year low in value of the pound6
For overseas investors, pre-Brexit the average UK residential property was worth $297,250. After Brexit, the pound has plunged and the value is now $30,259 lower. That’s a 10% drop and a really important opportunity for investment.
- Commercial property in the UK is less expensive in 2017
Again, due to the ongoing political uncertainty and Brexit, recent figures show that commercial real estate values in the UK have fallen by 3% (offices in London have fallen 3.8%), which shows the largest fall since March 2009. Some offices are worth from 5-19% less than pre-Brexit prices. It’s a good time to get in on the action.