Is UK Property still a good investment?

‘Safe as Houses’ has long been an adage that has indicates how highly regarded owning property is within the United Kingdom.  Purchasing property is considered by many to be a prominent life objective

However, the last couple of decades have seen huge growth in thе рорulаrіtу оf buу-tо-lеt as a way gain an investment return from the property market.

Early adopters will have benefited greatly. Eсоnоmіѕt Rob Thоmаѕ wrote a report in 2015 demonstrating that buy-to-let rеturnѕ over the previous 18 years outperformed returns from all other asset classes.

The research showed that annual returns have averaged 16.2% compared to 6.2% for UK equities since buy to let mortgages became available in 1996.
While this can be attributed in part to the phenomenal rise in house prices during this time, it explains why investing in buy to let property became such a popular strategy.

A number of changes in legislation and benefits for landlords along with higher property prices has led to many claiming the demise of buy to let. This has led to existing landlords and potential investors questioning whether to remain in the market. 

Long term property outlook is positive

Uncertainty in the market has caused many buyers and sellers to take a wait and see approach, moving slowly, resulting in little movement and fewer transactions. Ultimately the current climate in the property market is driven by a lack of confidence which is not a fundamental issue.

Long term factors affecting UK property show a brighter outlook. Growing population, supply lagging behind demand and fewer people per household all point towards growth in the property market in the longer term. Investors who own property can be confident in generating returns.

Short term volatility is unlikely to concern landlords who continue to let their properties due to strong rental demand.

Buy to Let challenges

Changes in tax legislation have created a more difficult playing field for Investors. Landlords are now unable to offset mortgage payments against rental income.

Alongside stamp duty rates of 3 per cent on new purchase, this creates an environment of tighter margins where more diligence and research is required to achieve profits.

Are house prices dropping?

Given the vast variation across different regions in the UK, average house price reports can be misleading.

Northern markets have seen more buoyant markets and higher rental yields than those in the south. While the majority of London homes have maintained value with much of the price drop caused by multi million pound homes in central London. Research can yield results for investors who can find the right areas and the right properties.

The Northwest and Midlands have maintained a strong proposition for investors. With house prices increasing, strong rental prices and demand have created attractive rental yields. Liverpool, Nottingham, Manchester and Leeds are all leading the way for rental yields.

Ultimately, while the market has become more difficult for investors, opportunities remain to create attractive yields and growth through property. With those leaving or staying out of the market leaving a further gap in demand to be exploited by those willing to be bold.

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