Property Investing in the UK
Today we will be discussing the points to consider when purchasing property in the UK with regards to market conditions and basic principles that should be undertaken before investing. There is of course some uncertainty because of Brexit and different laws being enforced along with tax laws that have also been put in place for investors. Therefore consequently do not expect a huge boom in the market or crash at this present time however it is good to understand what is exactly going on. As landlords/investors are beginning to feel the squeeze from a number of different areas such mortgage costs not being considered as an expense any longer. Also for instance last year according to Estate Agency Countrywide landlords bought 12.5% of homes sold in the UK which is a 9 year low compared to 14.7% in 2016 and 16.3% in 2015. Hence we are seeing a number of landlords starting to offload their entire portfolio and landlords are starting to try to purchase property in cash. Whilst investing in the UK it is important we ascertain what the picture of the market is currently.
- Prior to doing anything ensure you have done research, not to the extent where it is really in-depth. But you need to do enough research where you are confident about the area and location and so you are able to take some steps forward in terms of purchasing property in the area you have chosen. This will also allow you to be aware of what you can expect in terms of rental yield, capital growth etc after a few years. This will all need to be taken into account when considering the property you decide to purchase.
- Always consider the banks patterns and ascertain whether interest rates are likely to increase. As this is something that is expected to continue because if interest rates continue to increase then landlords are not able to take it into account as an expense and it will continue to increase which consequently will affect profit margin. So ensure that you consider this aspect as consequently you do not want a tight margin otherwise you may get into issues later down the road. You can either purchase with cash or reduce the leverage that you have by paying off your mortgage.
- In a number of locations in the UK there are comparable properties within a one square mile radius where prices are going up, down or were completely flat. So as we are aware price growth is slowing in areas such as London amongst other areas in the UK which proves to be an uncertain period for Britain’s economy. However with the uncertainty of Brexit and the economy currently for professional investors these are precisely the conditions in which such investors find opportunities to strike good deals. Regardless of their being a mixed picture across the property market. The number of housing transactions has been stuck at the same level for four years which is said to be approximately 1.2million per year. However in Prime London areas transactions have been down by 20% over four years.
Therefore if you understand the market and how to utilise a minimum amount of leverage as a professional property investor you can take advantage of the market conditions. However this would of course require a high level of understanding, and ability to spot the locations where there still is capital growth and a clear strategy of the further implications and regulations that have been imposed on investors.