Reasons to invest in UK property

[Joe Aston]

Well said Judith. We are absolutely seeing an increase in first time Ltd Company BTL purchases, as well as professional landlords switching full portfolios over to Ltd company.

The appetite from the specialist lending market is actually growing as the high street pull away from more complex lending situations. Lender 'battles' for the best rates will bring more opportunity for the professional property developer over the course of the next year. Bridging finance is particularly competitive at the moment.

 

[lookinginvest]

Hi Joe,

Do you think that Brexit will have any material impact on the UK property in the short, medium and longer term.

 

[PropEx]

I read somewhere that the UK has the highest property taxes in the world by some distance. On the positive side, the population continues to grow and they all have to live somewhere - for many people a property purchase is impossible so renting is the only choice. Buy to let may have gone through a difficult patch with tax rises but it has good potential long term.

The UK population isn't growing by much though and surely the growth will be even less after Brexit? Birth rates in the UK have been falling for years. Buy to Let investors have nowhere near "gone through a difficult patch" it is only the beginning, when interest rates rise that's when it will really get difficult.

 

[realdeals]

Hi PropEx,

While I see your arguments and reasons behind them, we all know there is a growing need for private rental properties to take up the slack created by a lack of local authority housing. No government (even a hard left government) could ever find the money required to create the supply needed for the private rental market. So surely this must result in growth in buy to let investments in the longer term?

 

[PropEx]

Hi PropEx,

While I see your arguments and reasons behind them, we all know there is a growing need for private rental properties to take up the slack created by a lack of local authority housing. No government (even a hard left government) could ever find the money required to create the supply needed for the private rental market. So surely this must result in growth in buy to let investments in the longer term?

When interest rates rise not many people will be able to afford to purchase buy to let properties. A lot of people are barely covering their mortgages just now due to UK's generally pathetic yields. They can't ask the tenant for much more rent as most people are paying above the odds as it is. It is crazy to even contemplate buying in the UK just now, I would wait a couple of years the bubble will burst sooner rather than later and prices will fall by 20, 30, 40%? The only problem being, the tenants won't be able to afford paying the same rent as they are now because wages will fall after Brexit.

 

[nmb]

PropEx - while there is a lot of uncertainty over Brexit, I am not sure things are as bad as some experts would have us believe. Facts:-

The UK imports more from the EU than we export to the EU

Only a couple of years ago many were talking about the EU and Euro both failing in light of Greece, etc

For foreign investors there has been an increase in their sterling spending power by up to 20% over the last year due to exchange rate movements. Does this more than offset the potential economic slowdown in the UK in the short term?

The recent sales of the Walkie Talkie and Cheesegrater buildings on relatively think rental yields would suggest overseas investors are not as down on the UK as we in the UK seem to be?

Just a few points of discussion

 

[realdeals]

PropEx - you make some valid points and the one about interest rates will be a major issue for many home buyers. However, I still think that demand for rental property will offer a backbone to the market in these times of volatility. I am not saying prices wont fall but maybe not by the degree many are predicting (and have been since last year).

In the back of my mind I am starting to believe that Brexit will not go through - the EU will eventually bend over to help the UK retain its place.

 

[PropEx]

It wouldn't be a huge surprise to me if Brexit doesn't go through, but the only reason it won't go through is because of a second referendum, I really can't see the EU bending an inch to help the UK. If it does then every country will say they are leaving to get a better deal.

Brexit will be an absolute disaster. With the exchange rate imports will be a ridiculous price and that isn't even counting the WTO tariffs that we will need to pay. People say that it will be good for our exports, yes if we had all the material here in the first place to build the exports but the fact is we need to import materials in order to build a lot of our exports in the first place.

 

[diyhelp]

We only need to look at German car imports into the UK to see the massive impact that no trade deal would have on the German car market. Yes, it will be a difficult few years but the structure of the EU is fundamentally wrong - top down government with the likes of Germany and France leading the way for their own benefit. The idea of free movement and access to, for example, the UK benefit system is unsustainable going forward.

 

[realdeals]

If the EU was not so blind and stubborn this would be the perfect excuse to make much needed changes to the structure. Instead they are still powering ahead with full integration and stripping sovereign, elected, governments of more and more power.

 

[Longterminvestor]

I appreciate what you are saying John but if there is anywhere near the economic reaction people expect if/when Brexit goes through then surely this would impact the real estate market? Jobs would go, people would struggle to cover their debts and surely house prices in general would soften at best?

 

[PropEx]

BRexit is a disaster. That said, it is not the end of the world. During the largest financial collapse in recent history, 92%+ of the UK population still had to go to work. Only 7%+ were unemployed. We can look at the other indicators. People can lose money during a crunch. That does not mean the population will go to zero, that there will be no one paying the rent, etc.

So, the objective is to hold on during the bad patches so you can ride the long-term results. Lower LTVs, so rate rises do not make much of a difference. Being able to underprice the competition, so the tenants have limited reason to leave. Weather the storm rather than expect you need to get out of the market before the storm.
Soft prices do not matter if you are not selling. I bought a flat around 2003. I can not tell you what it was worth in 2009. I do know what I paid in 2003 and I can estimate what it is worth now. I am in profit. The tenant pays the bills and they get a nice property with a view. Everyone is happy even though 2009 happened.

As a landlord, the goal is to stay in the market. Market timing does not work for landlords. Mostly because the timing is poor and the transaction costs are really high. Plus, it is hard to buy what you sold a year later.

When you say everybody is happy, I assume you mean you are happy because you didn´t lose your house? How about the people that did lose their homes in 2009 and what about the people that will lose their homes when Brexit happens(to be honest a lot of them would have because of the new BTL tax laws and the imminent interest rate rises). You were lucky enough to be in a position that you didn´t need to sell in 2009, but some people weren´t so lucky.

 

[PropEx]

Ok, well, firstly, the USA and UK have a double taxation agreement so your point about tax forms in the USA are irrelevant, any FIRPTA you need to pay will be given back to you and the management company shall easily sort this out. Secondly, the only people that want to keep their money in Sterling aren´t the brightest(in my opinion) as after Brexit, there will be a run on the pound and possibly capital controls, so to have money outside of the the UK is wise, I would say.

 

[Longterminvestor]

PropEx,

While you make some valid points let us not forget that the Euro is not exactly a stable currency. Whether the UK goes or stays is irrelevant in the overall picture as Germany and France to a lesser extent are pulling the EU along for their own benefits. There is still infighting and the Greece debacle has not been solved yet. Sterling may be struggling and could fall further but for someone to suggest that the Euro is a stable currency does not work for me. All of the members are pulling in different directions although it is all hidden under the "EU umbrella".

 

[lookinginvest]

Reasons to buy UK property - Brexit, now that will put the cat amongst the pigeons

 

[John Scott]

The UK property market is often dominated by London which is head and shoulders above the rest of the UK real estate sector. If you dig a little deeper, you will see that while there has been a general recovery in UK property since the 2008 worldwide recession the rate of growth is nowhere near that seen in London. As a consequence there are a number of reasons to invest in UK property such as: –

Economic stability

Relatively low interest rates

Growing demand for UK property

Growing demand for rental property

A lack of affordable housing

New build numbers well below demand for property

Are there any other reasons why you believe UK property is attractive in the longer term?

There are so many great reasons to invest in UK property. The UK property market is widely popular and huge. However, investing your hard earned money is indeed a big decision you have to make.

 

[Mike Wilson]

The UK property market is often dominated by London which is head and shoulders above the rest of the UK real estate sector. If you dig a little deeper, you will see that while there has been a general recovery in UK property since the 2008 worldwide recession the rate of growth is nowhere near that seen in London. As a consequence there are a number of reasons to invest in UK property such as: –

Economic stability

Relatively low interest rates

Growing demand for UK property

Growing demand for rental property

A lack of affordable housing

New build numbers well below demand for property

Are there any other reasons why you believe UK property is attractive in the longer term?

Reasons are good but how much prices of one canal land?

 

[Longterminvestor]

How far can London prices fall? The slide continues:-

http://www.cityam.com/287677/weather-heats-up-london-house-prices-settle-chill-

 

[Paolo Agostinelli]

Many of the individuals in this and similar posts have referenced lack of supply as a challenge for UK real estate investors. Have any of you invested in real estate in foreign markets and if so, where are you finding opportunities relative to the UK market and why?

 

[FWL]

The fun and games surrounding Brexit looks set to take the UK to the edge of the abyss. This concern and confusion will not help the economy and the property market. Expectations that "a deal would have to be done" seem wide of the mark if the details coming out of 10 Downing Street today are anything to go by.