Although UK property is one of the most highly regarded asset classes for its stability, all investments come with their intricacies and complications, which can then lead to misconceptions – particularly by overseas investors as they get to grips with the UK market or the buying process.
In this article, we will be addressing the top 6 myths that are regularly mentioned, to educate individuals to ensure successful investments with the strongest returns.
‘Surely prime city centres are oversupplied with residential properties now’
This is ranked as a top myth, as this is untrue. In prime investment locations, some investors perceive the scale of construction taking place as a sign of over-saturation. However, with the population increasing at such a fast pace, the demand for city-centre living is not expected to outweigh supply any time soon.
It is also worth noting that not all construction taking place in cities are residential. But instead consist of hotels, university campuses, car parks, commercial buildings, improved transport, and infrastructure – making the city an even better place to live, work and visit, and therefore attracting more tenant demand.
‘It is a risk investing in a property before it has been built’
Investing off-plan is a profitable investment opportunity, as investors can secure the purchase at a discounted price ahead of capital appreciation over the build period, giving them instant equity in the property at the point of completion. Reputable developers should have a portfolio of completed, successful properties previously launched off-plan, helping to reduce your risk. They should be able to give you an insight into predicted capital growth and rental yields based on market research and development history.
Other investors are reluctant to invest off-plan as they do not want to wait months or often years to enjoy their rental returns. Property should be seen as a mid to long-term investment and typically individuals that adopt this strategy get the best return on investment in the form of high and consistent rental yields and long-term capital growth. Property is incredibly profitable but only with the right strategy – the days of quick wins are over, and property is about stable, long-term returns.
In addition, by investing in off-plan, you are investing in a brand new, purpose-built development. This means that they are designed and built from the ground up with the end-user in mind. Not only does this type of property drive higher demand from tenants, but today’s tenants are also willing to pay a premium in order to get their desired living experience and amenities.
‘Traditional buy-to-let properties are cheaper and promise to drive the same returns’
A general rule of thumb is that if an offer looks too good to be true in terms of property investment, it usually is. If you see a cheaper than average property, promising higher than average rental yields, approach with caution and perhaps do your own research into the property type, location, and developer. Cheaper buy-to-let properties tend to be on the outskirts of cities rather than in prime city-centre locations, meaning less demand and lower rental yields.
Whilst your typical buy-to-let properties are typically cheaper to buy, they are often outdated, have few or no facilities and no management. Tenant priorities have changed significantly in recent years and individuals are expecting more from their homes than ever – a trend which has been accelerated since COVID-19 struck. As a result of spending more time at home, many tenants are now seeing apartment buildings as an extension of their apartments, enjoying communal space and shared facilities, and others wanting gardens and larger living spaces to provide room and greenery into their space.
‘Isn’t now a risky time to invest before the pandemic is over? Should I not wait to see what happens with the economy and property market?’
Do not wait to invest in properties, invest in property and wait! A recent report by the BBC revealed that the UK economy is set to grow at the fastest rate in over 70 years – a message which has been echoed by the International Monetary Fund (IMF) as they projected that the UK is set to have the joint highest growth in the G7.
With the ending of restrictions in the UK and bars, restaurants, events, and clubs fully re-opened – it is estimated to bring GBP 1.355.5 Billion into the UK economy every year. On top of this, we have seen house prices increase to record breaking figures compared to last year. With the UK economy and property market going from strength to strength, now is the perfect time to invest.
We hope you found these tips useful. If you are interested in having a single property or a property portfolio managed, please contact us today on 01332 384438 or email [email protected].