The UK is a unique investing environment and quite unlike many other regions globally. As the country negotiates its way through Brexit, many foreign investors are making use of the favourable exchange rate to enter the property market.
Anthony Doyle, a director of UK-based property investment company Propwealth, says Chinese and Middle Eastern buyers, especially, are purchasing lower-end, higher yielding real estate outside of London.
“South Africans too, are making significant acquisitions in the UK market with London being the number one spot and Liverpool coming in fourth,” he says.
Doyle outlines the key reasons for investing in UK property:
1. As the UK ring-fenced itself from the Eurozone years ago, sterling remains one of the world’s most stable currencies, which many foreign investors are keen to generate income from through UK investing.
2. Inflation appears to be managed by the Bank of England and inflation on a day-to-day basis is naturally negative. However, in the property market we tend to enjoy it for two reasons. The first is that it causes property prices to rise. Secondly, in the UK, salaries are generally pegged to inflation and therefore rentals tend to go up in line with this trend.
3. Economists have predicted a mild recession over the next few years, which bodes well for property investors as people will wait to buy (and to start the next property boom). This allows investors to get the best deals now.
4. Historically UK property prices have always doubled every 7-10 years and will in most likelyhood continue to do so. Currently as property prices have stagnated in some areas of the UK, investors are seeking lower-end properties that generate good cash flows. Furthermore, in these regions most people are not buying and are rather opting to rent, which is the best scenario for buy-to-let investors.
5. There are few first-time buyers. In fact, the average age of the first-time buyer is set to reach late 30s by 2020, as they simply cannot afford the deposits. Add to this the overall lack of high value to loan mortgage lending and you have a scenario where the cash buyer (or larger deposit buyer who mortgages) is the winner. Because of this, demand in the rental market has increased substantially. In many regions, there are more tenants than properties.
6. Furthermore, the UK government is simply not building sufficient housing to meet demandand in many areas is starting to rely on private landlords to assist where there are shortages. Population growth is expected to continue in the UK and be 70 million by 2025.
7. The UK, even with austerity programmes, is still spending on regenerating certain cities(with private partners) and this is where savvy investors are buying.
“One must always look at UK real estate as a long-term investment, and if you buy well, at the lower end with good management in place, the cash flows simply grow over time,” says Doyle.