Why Now is the Best Time to Invest in UK Property
It’s no secret that the last few years have been somewhat challenging for property investors looking to the UK. From the uncertainty that followed the Brexit negotiations to the COVID-19 outbreak completely upheaving our way of life, at least for the time being, it wouldn’t be surprising if you felt it currently counter-intuitive to invest in UK property.
On the contrary, now could be one of the best possible times to invest in a UK property. Whether it’s your first time buying or you’re adding to a wider portfolio, we’re currently witnessing a ‘perfect storm’ of reductions, coupled with low rates and currency benefits that may never be seen again in our lifetime – all while the generally less experienced ‘hobby landlords’ continue to drop out of a market that is set to trend positively in the future.
This has created an ideal window of opportunity, allowing investors to take advantage of one of the most stable assets in a robust market that has continually proven to deliver returns over the long-term. Here’s why now is the best time to invest in property.
Stamp Duty Land Tax Reductions
In July 2020 the Government announced a temporary Stamp Duty Land Tax (SDLT) reduction on property sales in an attempt to kickstart the housing market after lockdown.
Available on properties in England and Northern Ireland until 31st March 2021, this means that Buy-to-Let investors now only pay 3% SDLT on purchases up to £500,000, which could mean savings of up to £15,000 when buying during this period.
While this is a huge benefit for UK residents, it’s particularly appealing for any international investors that are interested in UK real estate. These investors should consider investing before 1 April 2021 – at this point the SDLT rates will revert back to normal on top of the additional 2% surcharge that is due to be enforced, as announced in the Budget in March this year.
So what does this potential saving look like in reality? Using an example of The Metalworks in Slough, the potential investor savings speak for themselves:
Low Interest Rates
With the Bank of England Base Rate remaining at a historic low of 0.1% after two successive cuts in March 2020, many lenders are now offering incredibly competitive Buy-to-Let mortgage rates and a raft of new products.
While this is excellent news for first-time investors, it’s also providing portfolio investors the opportunity to remortgage existing properties, release equity and leverage new investments.
International Currency Benefits
The pound continues to be weak when measured against dollar-pegged currencies such as Hong Kong and the United Arab Emirates (UAE), providing plenty of opportunity for overseas investors to find value in foreign exchange.
While UK property has always been popular due to relative affordability and historical performance, the Coronavirus outbreak has contributed to significant potential savings, meaning investors can maximise their value for money in the UK.
Similarly, while the stock market crashed between 25 and 30% in March, the property market remained strong, proving itself once again as arguably the most stable, high-yielding asset for investors seeking less volatile and more long-term alternatives.
Below is an example of the current savings that foreign investors from dollar-pegged countries could expect to find through foreign exchange rates:
*Exchange rates taken from www.xe.com/currencycharts/?from=GBP&to=AED&view=1Y and https://www.xe.com/currencycharts/?from=GBP&to=HKD&view=1Y for 13/12/19 and 23/07/2020. Exchange rates cannot be guaranteed and are subject to change.
Long-Term Growth Potential
It remains to be said that, despite the obvious challenges the market has faced, the outlook for UK property remains positive. Following lockdown, Savills, Knight Frank and JLL have each described ‘long-term optimism’ in various property market forecasts, explaining that despite lower transaction volumes, the property market (including mortgage lenders) is in a better place to bounce back than it was following previous crises such as the last financial crash.
Rental growth is still trending positively and demand continues to rise. Most rental market growth forecasts estimate increases throughout the next five years – Savills expect a 13.6% rise, while Knight Frank and JLL are forecasting 10% growth and 8.5% growth respectively over the same period.
Fortunately, the rental market has also adapted well to the ‘new normal’. Letting agents have largely re-evaluated the wider process and are now able to deliver online viewings, provide delayed agreements and attract a tenant base that is increasingly looking for the next move.
With the first week of April seeing a 30% increase in demand for rental property and 86% of buyers and renters still intent on making the same move they were planning pre-lockdown, these are welcoming signs for those considering investing in UK property.
Property Prices Holding Strong
Just as growth predictions remain positive, property prices are following suit. While transaction volumes have suffered the most during lockdown (as to be expected with social distancing measures), UK house price growth in the year to June 2020 sits at 2.7% – the highest level of growth since 2018.
PLC’s are also reporting a mini-boom following the market ‘re-opening’, with buyer enquiries jumping up by 75% since the start of July 2020 and average asking prices rising by 2.4% since lockdown began in Q1.
As ever, property remains a long-term game, meanwhile the number of ‘accidental’ or hobby landlords jumping ship due to the short, sharp shock that comes with a crisis of this scale continues to rise.
While there’s no doubt that both the economy and property market have felt the impact of COVID-19, recovery is expected to take a ‘V’ shape, rebounding quickly thanks to government measures and continued low interest rates.
Some are even predicting a boom similar to that of the ‘Roaring 20’s’, which occurred following the outbreak of the Spanish Flu epidemic in 1918. While we feel it’s too early to predict exactly how the UK economy will respond in time, history has shown that property is particularly resilient. For investors wanting a more stable, high-yielding alternative in these unprecedented times, now is a better time than ever to invest in UK property.