Investing in the UK Property Market During Coronavirus
During a recent webinar as part of the SevenQuestions Series, SevenCapital Director, Andy Foote, hosted a live Q&A to answer questions from real investors on the current state of the UK Property Market during Coronavirus. Below we share with you his views on choosing the best time to invest in UK property, selecting the right investment partner and how Covid-19 has impacted the UK rental market.
Should I wait to invest in property until after Covid-19?
Andy Foote transcripted answer:
These are uncertain times and of course it makes people worry about what’s going on, and I always talk about the financial crisis of 2008. 12 years ago at that time, we had no idea what it meant and it didn’t actually come to us until about two years after that, what had actually happened in the financial crash, and I think it’s a little similar with Covid-19. We will look back in a couple of years and understand it a lot better, but the fundamentals of property investment over the long term don’t change.
Since the early 1900’s the stats say every 13 years or so UK property values have doubled, and that’s not going to change because of the supply and demand data. We have got a huge undersupply of property in the UK and for 30 to 40 years the government’s been criticised for it. COVID-19’s not going to change that.
So if you can buy at any time, you can buy now or you can buy in the future, it doesn’t matter if you’re holding it for at least five years and nobody should be buying these days to flip next year – it’s not worth it when you look at the stamp duty and the other costs to get into the market. You should be looking at the medium to long term and so we all remember the old saying – ‘it’s not timing the market – it’s time in the market’.
How can I make the right property investment during Covid-19 and protect myself?
Andy Foote further commented:
“Make sure you get the right developer who doesn’t let you down. Make sure you work with somebody who delivers. Make sure it’s the right location. Make sure you’ve got a sustainable tenant demand in the future.
The cornerstone for any property investment, whether it’s residential, commercial or industrial is the tenant. Without a tenant, the value of the property will go down. If you’ve got vacancies or voids – your property will go down, so you’ve got to invest in a development that’s in the right location with sustainable demand. Whenever we design a development [at SevenCapital] we’re always looking for these amenities that’ll be desirable for this generation rent.
The private rented sector tenant is happy to pay rent now but they want the amenities, they want to be in the nice places and so all the apartments we’re developing have got amenities and they’re in the right locations for amenities.
To summarise, as long as you’re looking long-term and you find the right locations, with the right partner – the property will perform just like it would have performed buying at any time.”
What can an investor expect to happen to UK house prices in the next 12 months?
Mark Elliott from Savills commented:
Prices are now expected to be suppressed in 2020 due to the Coronavirus and we won’t see what was originally predicted last year as it’s obviously changed.
Savills still expect a 15% rental increase over the next three years and a 20-25% percent increase over the next three years in capital value. Savills still expect capital values will increase in the next twelve months but more modestly than predicted last year.
“You always have to look at 4 or 5 year periods, and if you can 7,8, 9 or even 10 year periods for capital appreciation. I think the people that are buying today will see a return on investment much more so than they would do in financial markets. People are looking for assets, they’re looking for bricks and mortar and they’re looking to take advantage of the weak pound that will fuel growth, which will in turn fuel your house price growth.”
How has Covid-19 affected the rental market for Buy-to-Let investors?
Andy Foote transcripted answer:
Our fathers told us when we were young “don’t rent it’s dead money“, but that has completely changed. People are now finding it more difficult to find deposits and mortgages and so they’re happy to rent.
There’s a huge demand for rents in the UK now. Before it was 80% houses 20% apartments, that’s changing right now as we see a transition in the UK. Developers are building more apartments and the UK are copying neighbors in Europe like Germany, France and Spain who already have 80% apartments and 20% houses, so generation rent is only on the up.
There has certainly been a temporary lull in the lettings market but there’s a huge backlog coming and it’s sustainable for the future.