Property Investment In The UK

The United Kingdom is formed by four countries – England, Scotland, Northern Ireland and Wales. The property market is therefore, huge and varied, and although not as sunny as Spain or as exciting as Cape Verde, there are plenty of options for everyone. Lately, there has been a lot of interest in the UK property investment market, since people have begun to realize that their homes are their best performing asset. This has prompted a number of amateur property tycoons to enter the market without a proper understanding of the factors surrounding the movements of this potentially rewarding segment.

A report from Nationwide’s ‘buy to let’ arm, UCB Home Loans, claims that the UK property investment market is strong. Amongst the reasons, the top one that emerges is the current low rate of return in the stock market. Further, access to easy funding is making buy to let more appealing than investing in equities. Recent appreciation in house values is also giving impetus to the idea of investment property pension. Rents in London and the South Eastern region are rising as well, so landlords stand to make more money. With price tags on houses hitting highs, more potential buyers are compelled to rent, meaning rise in number of tenants. The arrival of more immigrants and overseas students also gives a boost to the overall number of would-be renters.

With the strong demand and clear increase in the prices of homes in the UK, there are certain areas that are becoming the favorites for buy to let investors, such as London, Aberdeen, Belfast, Swindon, Southampton and Preston, amongst others. However, there are areas where the market seems to be increasingly saturated and potential for returns is diminishing. Another concern is that higher interest rates may squeeze profit margins. Add to that the possible low yield that accompanies appreciation in capital, and you will realize that caution is required in this market.

Important factors to remember while purchasing property in the UK are:

1) Do your homework – research is essential. Also remember that there are maximum cut-off prices over which you would be unwise to buy. Get professional help if possible, or else try to attend a workshop on property investment.

2) Consider property development – buying a renovation property at lower prices can allow you to improve the property and land, and increase its value considerably.

3) Consider property development through a ‘share scheme’ – sharers take on the role of property developer, buying land and building one or more houses or a block of apartments.

4) Factor in capital gains tax that will be payable for any amount over your annual allowance. If you are thinking of property development, consider residing in your ‘buy to let’ property while you develop. This may allow tapering of the capital gains tax at the time of selling. Consult a tax specialist for more details on this.

5) Choose the right type of financing – residential mortgages carry a lower rate of interest but a buy to let mortgage will allow you to borrow against the expected resale value of the home. If appreciation is anticipated or you plan property development, this is a useful feature.

6) Be wary of any attached strings in your mortgage agreement that could hamper the profitability of your investment in the future.

7) Consider investment in commercial property – in the UK you can include this in a SIPP (Self Invested Pension Plan) scheme. Always seek advice from a qualified financial or pension advisor.

In conclusion, I believe, while the huge gains maybe rarer than before in the UK property investment market, there is still a premium to be made, if you invest wisely – but always get advice before proceeding!