2017 was an eventful year for the UK property market and in that time there was a lot of new legislative changes in the property investment industry that has elevated apprehension for many people already in the game and many others who want to join the industry. On top of the seemingly impending doom associated with the Brexit vote to leave the EU, there are understandable concerns amongst UK property investors surrounding the uncertainly of where the industry will end up in the next few years. Although there has been a lot of good news, everyone is wondering where the industry will go from here.
Today, in 2018, the new year has bought a lot of interesting topics to the table. Last month was full of highs and lows, progression and regression. We have put together some of the highlights in property news from last month for you to read.
The UK Overtook Germany As The Top Area For Commercial Property Investment
The UK has always been a world leader in investment and business however the uncertainty of how the British economy will end up following the vote to leave the European Union has created a lot of concern, especially or those in the property investment industry.
Despite initial worry, the UK’s economy seems to be doing better than sceptical experts predicted it would in 2016. This is further supported by the fact that a report named the UK “the most popular destination in the world” for commercial property investment after overtaking Germany.
The news report stated that, “The commercial property investment market in Germany experienced a steep decline in the last quarter of 2017 from 34% to 23%, while the UK upped its game from 27% to 29%”.
Emmanuel Lumineau (the CEO of the global real estate platform, BrickVest) also added, “Our latest Barometer reveals that Germany is no longer the favoured destination for commercial real estate investment, contrary to its position in Q3 2017. Rather, the UK has once again become the most popular region for our investors.”
With the UK’s commercial property investment market predicted to have £50bn worth of transactions this year, the future is looking bright for the commercial investment sector.
The news article also mentioned that secondary cities outside the capital such as Manchester, Birmingham and the surrounding areas “had seen a marked increase in popularity” in the commercial property market, which is what has happened with the residential market since London’s house prices have hit the roof.
At Sterling Woodrow, we have already recognised the shift from residential to commercial property, and although we still offer residential buy-to-lets, we tend to focus mostly on specialist commercial investments such as student accommodation, hotels, and care homes, especially for our clients who want to move away from the residential sector for want of a higher rental income.
Brexit Isn’t What You Expected And The North Is Doing Well
A solid performance from the UK’s property market is predicted this year, and it could be because of the North. Recent news has revealed that the pound is now at it’s highest value since Britain’s vote to leave the EU in June 2016 at more than $1.40 compared to a 9% decrease verses the US dollar the day after the Brexit results.
In the face of difficult climate, the property market seems to be holding its own, and has “arguably remained buoyant” according to economy experts. HMRC revealed figures from 2017 weren’t as bad as people predicted stating that, “As of the end of last year, the number of property transactions in the UK totalled just over 1,223,400, which is just a 0.58% reduction on 2016’s figure of 1,230,580.”
Property investors are also taking advantage of the attractive investment opportunities in the North due to major growth associated with the Northern Powerhouse scheme in the Northern regions. The news article explained the change in the market writing, “Property prices in the capital have started to peak and level out due to lack of affordability and reduced demand, meaning less transactions have taken place, while the better value for money seen in other regions has supported the market.”
Our property experts at Sterling Woodrow have moved away from property investments in London because of the sky-high prices and comparatively low yields compared to other regions in the UK. Our focus is delivering property investments with the highest yields to our clients, so many of our opportunities are in the North in areas such as Liverpool, Glasgow and Leeds. We have also written a blog post about Brexit showing little to no effect on the student property sector.
Property Expert Gives An Insight Into The 2018 UK Buy-To-Let Sector After Tighter Legislations
Property expert, Mark Homer, co-founder of a property education company weighed in his opinion on the buy-to-let market and whether it will be worth it to stay in this sector as a landlord in 2018. He comments, “Fewer landlords are likely to buy in 2018 than previous years due to Section 24 tax restricting mortgage interest relief against rent, increased stamp duty and increased mortgage lender criteria.“
In recent years, the landscape of being a landlord in the UK has changed considerably, creating more restrictions and lessening gains for individuals who once used this lucrative sector to reap the benefits of both significant rental income and capital growth.
Last month, section 24 of the Finance Bill to abolish mortgage tax relief for landlords (first introduced in 2015) has taken into effect and it has hit many buy-to-let landlords, cutting into their profits. Combined with tougher lending criteria that was introduced to buy-to-let mortgages in late 2017, changing legislation on HMO licenses and forecast rising interest rates, it has left many landlords discouraged with staying in this sector.
The National Landlord Association (NLA) also confirmed that there has been a significant number of landlords already leaving the buy-to-let sector, stating that “20% of Buy To Let landlords are planning to reduce the number of homes they own this year highlighted just how significant an impact the recent changes as a whole have had on the private rental sector.”
Sterling Woodrow clients are also steering away from the traditional landlord property investment model and choosing to add more fully-managed properties to their portfolios. On top of this, being a buy-to-let is becoming less favourable and investors are choosing fully-managed property investments, which are less demanding and give private investors more assurance.
The New Public Register Of UK Property Owners Hasn’t Put Off Asian Investors
Overseas companies are now required to disclose details of the ultimate owner of the property when they buy or own a property in the UK. This new public register is part of the UK Government’s efforts to reduce rouge landlord crimes and crack down on criminals involved with money laundering through UK properties.
However, it is unlikely that investors from Asia will be put off by this new rule and they will likely continue to be attracted to “the buoyancy of the UK market”, according to South China Morning Post.
Many property transactions that take place in the UK are done by overseas investors, predominantly investors from China and Singapore, and the number of Asian investors is increasing each year. This may be due to the weaker pound as well as the potential of the UK property market.
Experts say that Asian investors aren’t foreseen to stop investing in UK property because “their interest is in the investment potential of UK property rather than in hiding their identities”. Tax experts in Hong Kong also added, “the register might impose a bothersome administrative burden, but would not alter the ‘risk-return equation’”.
Our company specialises in fully-managed property investments, which is attractive to many overseas investors because they don’t have to visit the property to manage the development. We have seen a increase in Asian investors, especially from China because they are interested in the passive rental income that we offer.
January has been a month of many ups and downs, however the UK property market looks like it is going to remain a profitable investment for UK and international investors.
There has also been a shift in the market and many investors are venturing out into other areas outside of the capital. Due to billions of pounds spent on regeneration in the North, private investors are getting involved in off-plan developments that offer higher yields than the South-East. Being a landlord is also becoming less desirable, and savvy investors who want to build their portfolio are investing in fully-managed properties that give them a passive income.
At Sterling Woodrow, we pride ourselves on helping new property investors get a solid start in the market and are happy to speak to you about your long-term goals and ambitions in property investment.
We also work with experienced investors to help them increase the value and profitability of their portfolios.
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