Property News – Brexit Update
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Property investment in the UK is still attractive, despite the headwinds of higher stamp duties on investment properties, a tougher borrowing environment, and changes to the tax relief on buy-to-let mortgages and wear and tear costs. Here are a few of the major reasons to invest in UK property.
The law of supply and demand has impacted the UK property market for centuries. A continuously growing population fuels demand for new homes. This boosts the price of homes and is great news for property investment in the UK.
According to the Office for National Statistics (ONS), the UK population is forecast to grow to:
This is population growth of more than 11%. To put this in some perspective, the UK would need six cities the size of Birmingham to house it – or 13 Manchester, or 12 Liverpool. That’s a huge demand for extra housing.
The average UK house price has doubled every eight to 10 years during the last 100 years. Even during financial crises, property investment in the UK has proved more resilient than other assets. When the stock market almost halved in 2008/9 because of the Global Financial Crisis, the average UK house price fell by just 14%.
Stock markets tend to have crashes every 10 years or so. The Oil Crisis was blamed for the slide in the mid-1970s. Then there was Black Monday in October 1987. The dotcom bubble burst in 2000. Throughout such stock market volatility, UK investment property has remained remarkably resilient and astoundingly stable. As ‘safe as houses’, as they say.
(Read our article “If you’re a long-term investor in stocks, you’re a long-term loser” to discover the truth your financial advisor would rather you not know.)
When you invest in buy-to-let property in the UK for the long term, you benefit from the rental income that you control.
Generally, rental prices increase in line with inflation. Sometimes they rise slower, and sometimes faster.
If you are investing for retirement, the inflation-proofing quality of buy-to-let investment property in the UK will be very attractive to you – especially when measured against the cost of an annuity designed to protect your income against inflation.
In the UK, you can borrow to invest in property. This means you have the potential to make money on other people’s money, thus boosting your comparable return.
As an example, let’s consider an investment of £200,000, using £50,000 of your own money as a deposit and a £150,000 buy-to-let mortgage to fund your investment. Let’s say that the mortgage interest rate is 4.5%, and you achieve a gross rental yield of 7%.
You will make a gross income of 2.5% on the £150,000 you borrowed, after allowing for the interest payment. Put another way, your gross rental income is £7,250 (7% x £50,000 + 2.5% x £150,000), or 14.5% of the capital you invested.
It gets even better. Should the property value increase by, say, 30%, it would now be worth £260,000. Before costs and tax, this is a profit of £60,000. That’s 110% on your original £50,000 investment.
Such incredible potential returns are all thanks to the benefits of leveraging in property investment.
Finally, here is the one that will really make a difference in your life. Who wants to work for their money, when you could be sitting at home (or on a beach) enjoying the fruits of someone else’s labour? Hire an investment property manager to manage your property, and benefit from the perfect passive income that could give you the lifestyle you deserve.
For its potential to produce incredible passive income and capital growth over the long term, property investment in the UK is a highly attractive option. Projected population growth should help it to produce the kind of returns it has historically, as you benefit from using other people’s money to maximise the return on your own investment capital.
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So the government announced this reform, of itself it’s nothing dramatic as long as they do a much better job on the Court Reform and the Section 8 strengthening.
The problem we know is that the government is inept at reform so it’s likely to have further negative effects on the market.
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Hey, guys. Brett here, Brett’s Property Rants. What I want to do is, I want to just go through the Section 21, the end of Section 21, because the government’s come out and announced that, effectively, Section 21 is going to be no more. Now, importantly, that doesn’t mean now. They still have to go through a whole in processes and so it’s unlikely to happen before … certainly not in 2019, especially with Brexit. 2020 is more likely, but sort of back end, I imagine.
I just think that the government’s going to be so focused on the Brexit stuff that this will become a backdoor issue. But literally, they’ve hardly done any consultation. They’ve already made the decision, even though … It’s almost like to come out and say, “This is what we’re doing,” right after. And actually what they’ve said is that they want to do a further consultation on longer tenancies, and so this is one of the things that they want to do, is actually get the longer tenancies.
So basically, it’s still way long way off. Right now, I think the important thing is, as landlords, and what is going to start to hear more from me now, is we need to get together, and we need to become one voice as an industry, as a body, so we actually get heard. Because I think we’ve got to realize, the government is arrogant, and they think, “Well, there’s no way landlords are going to vote with Labor because Labor’s talking about all these rent controls and restrictions and things like that. So we’ve got them. We don’t need to worry about them. They’ll vote for us.” But I think what we need to start doing is saying, “Uh-uh, you’re not guaranteed. What we will do is disrupt you by voting for a third party or somebody else.”
Because I think they have to understand that what they’re doing is they’re trying to appease tenants, because Labor, they feel Labor’s been taking the tenants away, so, therefore, they’re doing these things to try and get the tenants back on side. Meanwhile, they’re saying, “Stick it to you, landlords.” They’re so arrogant about everything they’ve done, and that’s the thing that really peeves me off. In most businesses, you have a business and this is your income, you can deduct your expenses. If something goes wrong, you’re given a chance to put it right.
All the legislation that’s coming out now, it’s not a question of putting it right. It’s a question of, “Here’s the fine.” And the local councils are going to do it, and here’s … Effectively, what we’ve become is we’ve become the punching bag for the local councils to extort money out of. And make no mistake, most of this stuff is extortion. I mean, the very fact that one of their proposals is that with the tenant fee ban if a tenant is late 14 days, you can’t charge them interest. So basically, tenants can have an interest free loan. It’s ridiculous. Nowhere else are you able to get an interest free loan for 14 days. But, hey, punching bag landlords, that’s what they’re doing.
Anyway, back onto the Section 21. So it’s unlikely to happen straight away. There’ll be some further consultations, and that’s why I’m saying we need to come together as one voice. Really, what this all about … And look, to be fair, the whole Section 21 thing, how this affects us will depend on, number one is, how they strengthen the Section 8 and how they solve the court problems. Because make no mistake, this whole issue is not about Section 21. Section 21 has been one the most effective ways to get a tenant out, because you don’t want to rely on Section 8, as much as you would like to. There are so many times I’ve seen in court now where the judge rules with the tenant and gives them so much leeway at the expense of the landlord.
It’s like there’s no chance of getting that money back, and this is the problem. It’s almost like, “Oh, yeah. Oh, it’s a tenant. Oh, okay. I know you did the wrong thing but have another chance. Go away. Come back in two weeks time or three weeks time or six weeks time.” And then what a tenant starts to do, it starts then, “Oh, I’m sick today, and here’s my doctor’s note. So I can’t turn up. Let’s put it off.” So it’s another time. This is the sort of stuff that’s going on in the courts. Not only that, it takes so long to get. So they need to strengthen this.
One of the things that I’m now looking at is not using the court bailiffs, but actually using the High Court bailiffs. In other words, private institutions to go and get that debt. So when you’re in court, you actually ask to say, “Can you give it to the High Court?” It costs you money. So the other way’s free, there’s an admin fee. This way costs you money, but actually, you get it quicker, because with a High Court bailiff there’s no 14 days warning. It’s, “Right, get out now. We can go round there and execute that possession warrant.” There’s all these sorts of things, the questions around that.
The major thing is, okay, Section 21 goes, fine. Actually, it doesn’t matter. What we need is a way to end the tenancy when there are issues, which is Section 8. The problem with Section 8 is, most people will tell you how things go in court, which is that the tenants get lots of leeways. The problem is, it takes so long to get to court that it costs so much money. This is all about court reform and what they’re going to do there. The problem is, there’s no money in the courts. There’s no money. It’s ridiculous. I mean, it’s so underfunded. One of my best mates, he used to be a barrister in the criminal prosecution service, and it’s amazing how his income went from this down to where he actually got out of the industry voluntarily early, become a university lecturer because there was no money in it. Because the governments were austerity and austerity for like 10 years.
Look, the problem for me is what’s going to happen and what’s going to happen with Section 8. They’re the two keys issues that you need to consider and you need to continue to watch out for. But it’s not happening straight away, so you hear [inaudible 00:05:45] for it. So don’t expect definitive answers right now. Nothing changes. You can still use your Section 21s in the appropriate way. And look, for me, this is another landlord bashing thing is, most landlords don’t misuse it. Most landlords use it correctly and properly and do the right thing. But unfortunately, a small percentage do, and that’s what the shelters and the governments and that are jumping on and using, “Oh, look, this is happening all the time. We need to fix this.” It’s like, rubbish. You’re a bunch of idiots. Anyway. All right, guys, have a great day and live with passion. See you later.
Making money from property is one of the most satisfying ways of investing. And there are many strategies that you could use to do so. In this article, we describe five of the most popular.
When you purchase a buy-to-let property, you are investing for the long-term potential in a growing private rented sector in the UK. By investing wisely and getting good tenants, you should profit from inflation-proofed rental income and long-term capital gains from rising property prices.
You can take advantage of the benefits of leveraging in property investment, which massively improves the returns on your invested capital.
You can pass on many of the duties and responsibilities of being a landlord by hiring an experienced and competent investment property manager. With effortless property management, you should benefit from perfect passive income.
Investors who want to profit from capital gain, without holding the property for the long term, can do so by using a strategy commonly called ‘flipping’. Two ways you might flip property are:
If you choose the first method, making money from property this way takes discipline, tight control of costs, and a systematic approach. You’ll need to consider that a short-term fall in property values could damage your forecast returns.
With the second method, you are somewhat protected against the potential for short-term price volatility – thanks to the discount when you invest in off-plan property. By the time you come to sell, this discount will act as a buffer against a fall in the market. If the market price has increased, this will be translated into a larger profit.
Investing in a holiday let property is similar to investing in a buy-to-let property, except that making money from property this way relies on a steady stream of short-term vacationers rather than the more stable income from longer tenancies.
There are some tax advantages over buy-to-let investment. For example, you can offset all your mortgage interest payments against your letting income, and the cost of furnishings can be deducted from your income before tax is calculated. Also, because this type of investment is classed as a business, profits become ‘relevant earnings’ for pension purposes – meaning you can increase your pension contributions.
Holiday lets pay higher yields, but you will need to market your property effectively to take full advantage. (Read our article “Is holiday let property a good investment?” for more information.)
For cash investors with a fixed timeline for their investment, and who want a guaranteed return, investing in hotel rooms may appeal. You gain exposure to high-yielding property investment, without having to buy (and run) an entire hotel! In brief, this type of investment works as follows:
This could be a great way for making money from property if you have a cash pot that you don’t need now but will need in, say, five or seven years (for example, to pay school fees for your children).
Have you ever wished you could make the profits that banks make when they loan money to others? Developer loan notes allow you to do just that. In effect, you lend a developer money over a fixed term to help them fund their project. In return you get:
The amount needed to invest is smaller than for most other property investments, and you can build a portfolio of loan notes paying interest and maturing at different dates – allowing some exceptional budget planning.
There are many ways of making money from property. The five described here are among the most common. Which is best for you depends upon your personal circumstances, investment objectives and other factors. For a confidential, no-obligation discussion of your options, contact one of the team at Gladfish today at +44 207 923 6100
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When investing in property, one factor that is fundamental to success is its local economy. Professional property investors know that the strength, depth and breadth of an area’s economy is a powerful determinant to the strength of its property market. More jobs attract more people into an area, and that increases demand for housing. When we conduct our research and due diligence in our search for the best places to invest in property UK, local economic factors are high on our list.
Its local economy is one of the reasons we love Birmingham. And we’re not the only ones – big businesses, SMEs and start-ups love Birmingham, too.
Global businesses are choosing Birmingham for many reasons, including its young, well-educated population and a local authority ‘Big City Plan’ that puts economic growth at the heart of its long-term strategy (and creating more than 50,000 new city centre jobs over the next 20 years).
Big companies including HSBC, Deutsche Bank and PwC have located or relocated here, bringing thousands of jobs into the city. They are unlikely to be the last. Increasingly, companies based in London are casting their eyes over to the UK’s second city. The exodus of companies from London may gather pace the nearer we come to HS2 services running (with the journey time between the two cities slashed to less than 50 minutes). The advance in technology and online speed is also a factor in making regional cities like Birmingham more attractive than London, where costs are much higher.
Birmingham’s central location, linked to the rest of the UK by an extensive road and rail network and to the rest of the world via Birmingham Airport, is a further attraction for big businesses that have extensive branch networks, or that supply goods across the UK.
It may not surprise you to learn that London is the UK’s number one city for business start-ups. It is, after all, the UK’s largest city. It may not surprise you that Birmingham is second to London in the number of companies starting. What may surprise you is that Birmingham is the UK’s most entrepreneurial city, with a far higher start-up to population ratio than any other UK city in 2017, including London.
This level of growth in start-ups is likely to be a very important factor in Birmingham’s economic growth in the future. Big businesses may grab all the headlines – creating 1,000 new jobs or more in one hit is big news, after all – but SMEs are the driver of new jobs in the UK. According to a repost from Santander, published in November 2018, SMEs create three times the number of new jobs created by big businesses. Their research showed that between 2013 and 2017:
Managing director of Santander Business commented, “While there are many great roles available working for large companies across the UK, SMEs remain the life blood of the UK economy.”
The reasons Birmingham is so entrepreneurial and attracts so many SMEs and start-ups mirror the reasons why big businesses love the city: great transport links, a supportive local authority, access to a large, well-educated and young workforce, and investment in infrastructure.
For big businesses, the pull of Birmingham is difficult to dispute. It’s more affordable than London, has fantastic facilities, and offers residents an amazing lifestyle – the shopping and leisure options in Birmingham here are incredible.
It is the host of the 2022 Commonwealth Games – won at least in part because of its strength of infrastructure and transport connections, and its appeal as a modern city.
The population is young and diverse, well-educated and entrepreneurial – an ideal demographic to support the UK’s largest business, financial and professional services sector outside of London. With HS2 approaching, it is possible that Birmingham could become London’s next commuter town, too.
There is a real feeling of positivity around Birmingham. Inward investment is flowing, and new business start-ups are flourishing. The strength and diversity of Birmingham’s local economy is just one of the eight reasons investors are snapping up Birmingham property, but it is extremely compelling. The opportunity to benefit from a strong and growing economy, and the young professionals who will be looking for rental property, is one that property investors should not miss.
To find out more and receive an in-depth appraisal of the best property investment opportunities in Birmingham, get in touch with Gladfish today.
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According to Cushman & Wakefield, the global real estate agency, property price growth has been faster in Manchester than anywhere else in the UK in five out of the last six years. In 2017, average price growth of 11% was more than double the national average.
In this article, you’ll learn that Manchester is recognised as a property hotspot globally, and I’ll introduce you to an area which I think has great potential to outpace even the highest average property investment performance in Manchester.
The Economist Intelligence Unit (EIU) recently released its annual survey of the world’s most liveable cities. Manchester has soared through the rankings.
The Global Liveability Index rates 140 world cities across a range of lifestyle variables. These include 30 factors in five broad categories: stability, healthcare, culture and environment, education, and infrastructure.
Austria’s capital Vienna has taken the top spot. Of the UK’s cities, Manchester came top in 35th position: a whopping 13 places above London. However, Manchester’s position in the top quarter of global cities measured by the index doesn’t tell the whole picture. It is surely the standout performer, having risen an incredible 16 places in the league table compared to its position last year.
The survey’s editor and Head of City Practices for the EIU, Roxana Slavcheva, noted how Manchester had swept aside the Manchester Arena terrorist attack of last year. Indeed, its improved security score was a factor in its meteoric rise, which now sees the city 2.2% ahead of London in the EIU scoring system.
She also noted that, “What is more, Manchester also represents a regional trend over the past year, where there have been notable improvements in security in several western European cities which have shown resilience in their recovery from terrorist attacks.”
Manchester’s improved resilience has been reflected in the performance of property prices in the city.
Manchester’s property prices have continued to outpace those of other UK cities. Turning back to the Cushman & Wakefield analysis, Manchester property prices increased by 9% between July 2017 and July 2018. That’s a colossal performance in the face of so much negativity surrounding UK property as we move through the Brexit timeline.
Cushman & Wakefield are almost as bullish about the prospects for property in Manchester as I am. Their Associate Director Julian Cotton has said, “Greater Manchester is the UK’s largest and fastest-growing economy outside of London, having transformed itself into one of Europe’s most dynamic and exciting cities in which to live and work. Manchester city centre and Greater Manchester as a region has swiftly become a desirable and immensely lucrative location in which to invest.”
For longer-term buy-to-let investors, the potential returns look particularly attractive. There is a high proportion of students compared to the population, the population is growing rapidly, as are the number of businesses, and the demand for rental property is following suit. Consequently, rental prices have been rising strongly: up by 10% in the year to April 2018.
At the edge of the city centre, Trafford is about to undergo largescale regeneration that will transform another swathe of the Manchester landscape. Trafford Council is working with developers on a number of schemes. The regeneration and redevelopment will provide a huge boost to the area’s offering of retail, leisure, education and housing. It will also take advantage of Trafford’s two ‘Old Trafford’ sporting arenas. Highlights include:
Trafford is one of our locations of choice in Manchester. Having already benefitted from huge investment into regeneration, this latest regenerative effort is the icing on the cake. It’s a prosperous area, with weekly wages above the national average, and home to the famous Trafford Centre (Intu), the largest shopping centre in the UK.
While the average house prices here are above the Manchester average, the dynamics of the local economy and the investment into it leads me to believe that an investment here could have serious potential to produce higher-than-average rental yields and long-term capital gains.
To learn more about Trafford, hop over to our Trafford Property Investment Guide for a more detailed snapshot of the factors that underpin our confidence. For a more particularised chat about the best current property opportunities, contact Gladfish today to book a meeting.
Live with passion,