UK residential and commercial property has a long and reliable history as an investment for consistent returns. Last year saw a fairly calm property market although prime London homes didn’t perform as well as some regions, with prices falling dramatically at the top end.
Buy-to-let investors found value in affordable homes where prices have been rising in some parts of the country. However, the market was lukewarm which many feel indicates further weakening in 2020. The BTL market has also been hit by regulation and taxation, making it less attractive for many investors.
Although investment interest in UK property suffered during the extended uncertainty surrounding Brexit, the tide has now changed.
The result of the general election and subsequent Brexit event on the 31st January has injected more optimism in British property. However, with more cost increases set to hit buy-to-let landlords in the UK from April, investors are asking if property is still a safe foundation for a well-balanced portfolio in 2020.
Here we take a closer look at what savvy property investors should keep any eye on when looking for value in the UK market this year.
Mortgage Rates May Rise
Mortgage rates are currently at historic lows and we’ve seen an increase in buyers taking out five and 10-year fixed rate mortgage products in a bid to lock into low rates for the long term. Lenders are keen to win your business. The highly competitive mortgage market has seen lenders introduce very low rates for those looking for a buy to let mortgage.
However, be careful to shop around and don’t let mortgage rates scare you off investing. There are plenty of products available that would allow you to remortgage an investment property if need be. Note that from 6 April 2020, tax relief for finance costs will be restricted to the basic rate of income tax, currently 20%.
Look to the North
Landlords looking for higher rental yields without spending bundles of cash buying assets, should look to the North of England. Manchester, Leeds, Liverpool, Sheffield, and Birmingham all offer considerably higher rental yields compared to London and the South East. House prices in some areas are below £200,000, making these areas hotspots for first-time investors.
But it is important to note: just because a property is cheaper and seemingly more affordable, doesn’t necessarily mean it’s a better investment. If it will struggle to rent or sell, then the fact it’s cheaper is almost irrelevant. So as always, investors should do their homework.
With demand for rental properties remaining high and unlikely to change any time soon, investors in the right areas will be able to achieve good and steady returns. 2020 is as great a time as any to enter into property investment, or increase your property portfolio, particularly if you’re an investor with a long-term game plan.
Consider Build to Rent Opportunities
Many investors steering their portfolios away from BTL are turning to the Build to Rent sector. This market showed a strong performance in 2019, which is expected to continue this year. According to research from Savills published in January, there are just over 152,000 Build to Rent homes across the UK, including those in the planning pipeline. A quarter of these are now complete, equal to 40,180 homes.
Across the country, the entire Build to Rent sector has grown by 15% since the last quarter of 2018. In real terms, this amounts to over 20,000 additional Build to Rent homes in the past year. The majority of this growth has come from outside of the capital in key regional cities such as Birmingham, Cardiff and Edinburgh. However, investors are also recognising the potential for Build to Rent in smaller cities with strong fundamentals, which is set to give a further boost to the sector in 2020.
If you are interested in building a solid foundation to your investment portfolio with UK property, Ignite Invest is here to help. We offer a variety of profitable opportunities in exciting investment destinations in the UK. Find out more by contacting an adviser today.