Local and foreign investors are showing greater interest in UK properties as a means of making profits. The residential market is not being impressed by the coronavirus pandemic and offers excellent potential, as demand for real estate exceeds supply.
Experts estimate a 21.1% increase in house prices in the UK and predict that the housing bubble will continue until 2025. While this represents an investment opportunity for many, investors know that good research is crucial. Knowing when and where to buy properties is part of any successful investment strategy.
Real estate investing in UK 101
Residential properties are in demand in the UK for this year and even in the years to come. Investors who wish to venture into this market should identify suitable types and locations of investment to generate substantial returns in the short and long term. Here are some things you should know:
# 1. Types of residential real estate investment
Financiers wishing to venture into UK real estate can choose between buy-lease, property development or new build reversals.
Buy-let involves buying properties and then renting them out as rooms, apartments or entire houses. As a long-term investment, rental purchase generates income and ensures capital growth.
This is the hottest real estate investment trend in the UK as most people find it more convenient to rent than to own. Foreign and local investors can consult UK property investment firms such as Thirlmere deacon and others to provide a range of options.
Those who prefer to invest for the short term can consider real estate development instead. In this scheme, investors renovate or renovate the property and then sell it for a higher price. They can look for properties that are below market value and upgrade them based on the preferences of the buyer.
This method looks promising for the UK housing market as the demand for refurbished housing increases. Buyers look for larger homes that can accommodate work-at-home arrangements. They also prefer houses with gardens as they seek to spend time outdoors despite intermittent closures.
Another investment option to consider is the new construction turnaround. Investors buy a property while construction is still in progress and then resell once the plot is complete.
This investment strategy responds to the growing demand for housing and ensures a hassle-free approach for passive investors. New construction guarantees improved functionality, lower maintenance costs and additional benefits according to the developer.
# 2. Investment hot spots
Apart from the types of investment, it is also essential to know the best places to buy a property. UK hotspots support the North-South Divide, the North and the Midlands boasting of lower prices and higher rental rates.
The Office of National Statistics shows that house prices have increased across the UK, with the following regions leading the housing boom:
- North West: Liverpool North, Liverpool South, Crewe
- Wales: Wrexham
- East Midlands: Nottingham, Mansfield, Newark
- West Midlands: Coventry, Wolverhampton
- Yorkshire and Humber: Barnsley, Bradford, Dewsbury, Halifax, Huddersfield, Leeds
Apart from this, investors can also explore regenerated cities that provide additional residential, commercial and recreational amenities. These zones are improving transportation networks and reallocating public spaces to comply with security protocols due to the pandemic.
They should also consider promising locations such as Falkirk and Kilmarnock in Scotland, Slough in Berkshire, Cleveland in North East England and Sunderland in Tyne and Wear. These are attractive to young professionals, families and even retirees due to the suburban vibe and proximity to urban centers.
# 3. Generation Rent
Besides the proper investments and market hot spots, investors should also know their target market – UK generation rentals. That span ranges from 20 years working in the concert economy, professionals in their mid-thirties, up to 65 and over who are downsizing to get the most out of their retirement money.
Renting is becoming a wise option for many as house prices continue to rise along with the rising cost of living. Investors can take advantage of this trend by venturing into the private rental sector, offering single-family homes, apartments, or multiple-occupancy homes (HMOs).
With HMO, three or more people who are not biologically related rent a single property and agree to use the same bathroom and kitchen. This can produce three times the rental yields, fewer arrears, and provide some tax benefits to homeowners.
Flexible housing options are in demand as most of the UK population continues to rent rather than own. This is a welcome opportunity for investors who want to take a share of the rental market.
# 4. Benefit from tax advantages
Buying real estate can also be an advantage for investors in terms of tax incentives and other benefits. As announced by the UK government, homeowners can still apply for a reduced stamp duty property tax until September 30, 2021. This extended tax break, as well as other incentives, applies to local owners and foreign investors.
Investors looking for profitable businesses may view UK properties as additions to their portfolio. With growing demand for rental housing and extended tax breaks, they can explore housing hot spots and provide affordable housing for all ages of UK renters.