As we approach the end of 2017 there are an array of differing opinions about the worldwide real estate sector and specific country markets. On one hand there were high hopes that Donald Trump would bring about a new era of growth for US real estate but so far his policies have fallen flat. After voting in favour of Brexit, there were also high hopes that the UK would prosper as a truly independent nation but these have started to falter. While European markets are mixed to say the least, the current focus on the UK and Brexit negotiations has given struggling European property markets a period of respite. So, what are your property investment strategies for 2018?
Capital growth investment strategies
While short-term speculators, sometimes referred to as “flippers”, often attract derogatory comments and negative press coverage, they are a vital part of the liquidity of worldwide property markets. The truth is that even in the direst of circumstances there will be situations where properties are undervalued and there is potential for a short-term gain. However, whether property investment for capital growth will be as easy for less agile investors remains to be seen.
The UK housing market seems to have turned down from its August peak, the performance of the US housing market varies widely and there is still a significant hangover of property in Europe. It might be more challenging to utilise a successful capital growth policy in 2018 but if it was easy then everybody would be doing it.
Rental income investment strategies
Whether looking at traditional buy to let or HMO investments there are some very attractive rental income yields on offer in the UK and further afield. As property prices become more subdued, amid short to medium term economic and political concerns, there is the opportunity to cherry pick some double digit rental income yields. While some will point out government policies to increase the number of new builds per annum, this has been “on the cards” for decades now and little has been done. As a consequence, demand for rental property is likely to remain strong, offering support to some of the more attractive yields.
When you also consider UK base rates are at near historic lows, and unlikely to push too far ahead in the short to medium term, high single digit and potential double-digit rental yields look even more attractive. Rental income investment strategies offer the best returns on a long-term investment horizon as well as the opportunity to build up a sizeable portfolio. Unfortunately, many investors want to bank capital gains tomorrow and, as we have seen in the cryptocurrency sector, many are prepared to follow like sheep into markets in which their knowledge is at best sketchy.
There will always be opportunities to lock in attractive rental yields as there will always be opportunities to bank short-term capital gains. In the short to medium term the cost of finance is likely to increase a little although house prices in areas such as the UK may come under more pressure in light of Brexit. There will be opportunities aplenty, chances to flip undervalued properties for capital gain as well as locking in extremely attractive rental yields. However, this may take more in depth research during 2018 with so much uncertainty in the UK and around the world.