Property investment UK has long been seen as a prudent way to invest as it offers potentially attractive returns. That’s been for good reason: almost everyone plans to invest in property which may be simply in the form of buying a home. But over the years, the popularity of buy-to-let as a way to get additional exposure to the property market has grown substantially.
While that can in large part be put down to the rise in house prices over the same period, it does demonstrate why property investment via buy-to-let became so popular. But swingeing tax and regulatory changes over the past few years, coupled with high property prices, have had an adverse impact on the buy-to-let sector.
Property market fundamentals
However, residential property can be an option in the long run. Residential property is a cyclical market – like anything, it has ups and downs in the short-term. Uncertainty around Brexit has prompted many buyers and sellers to sit on their hands, choosing a wait and see approach to moving house.
As a result, the number of homes changing hands is a bit subdued at the moment and it’s putting some pressure on house price growth. However, the uncertainty in the housing market is being largely driven by depressed confidence.
Many experts point to longer-term trends that underpin the future performance of residential property investment.
The UK’s population is growing, the building rate – while improving – is not keeping up with demand, and the number of people per household is falling due to many reasons and fewer families choosing to live intergenerationally.
In short, there are too few homes for the existing population and that’s a situation which is likely to endure for the medium to longer term.
That means investors who have exposure to property as an asset are likely to be able to generate a return from property investment UK as demand outweighs supply.
Investing in buy-to-let particularly is also about both capital and income.
Rental growth is strong now and so long as landlords are prepared to keep their money invested for the longer term (a minimum of five years) then there may not be short-term fluctuations in house prices.
Political and economic uncertainty appear to have done little to dent investor confidence – particularly overseas investors.
*According to a research from Knight Frank, the UK had reclaimed its position as Europe’s leading commercial property investment market in 2018. Over the course of the year the UK overtook Germany to become the favourite destination for property investors.
Falling house prices
The property market isn’t just one number, which can often be the impression left by average house price reports. There is enormous variation across regions, and the UK’s constituent countries.
Even within London, where prices have been widely reported as under pressure, prime property hugely distorts the numbers. Ordinary family homes and rental flats have stood up against a fall in value much more effectively than £30million villas in Kensington & Chelsea.
Savvy investors looking at the bigger picture can still find the right areas to invest.
Investing in property without buying to let
Traditionally, the only way for these investors to gain exposure to the residential property market was through buy-to-let. Having a house you could rent out provided good returns in rental income, but also allowed landlords to benefit through capital gains. Owning and running your own property can be rewarding, but it can also be a practical and time-consuming.
However, there are other ways to gain exposure to residential property without buying the bricks and mortar directly.
Property crowdfunding, peer-to-peer lending, and investing in the right funds can give a stake for property investment without the hassle of buying, running, and selling property.
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