- 20% of the UK population will be renting by 2023
People are increasingly being forced 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. In addition, there are record levels of population increase, meaning 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 global events, 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 just takes an increase in value 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 under your ownership, you alone 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 sort of flexibility 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 pound
Pre-Brexit the average UK residential property was worth $297,250 for overseas investors. Since the result of the referendum, the pound has plunged and the value is now $30,259 lower. That’s a 10% drop leading to 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%) – the largest fall since March 2009. Some offices are worth from 5 - 19% less than preBrexit prices. It’s a good time to get in on the action.
Property investment risks
Prices of property and rental demands fluctuate.7 They always have and they always will, so property investment is best viewed as a long-term investment.
Giving the investment a decent length of time means that you can ride out losses if the housing markets slow, and earn again when they improve. However, if you invest everything you have into a buy to let property and the market slows considerably, then you could make life awkward for yourself.
One way to avoid this is to diversify your investment portfolio and hold different types of investments that will cover you if or when one type struggles