By Simerpreet Kukreja
For a long time, British property has been magnetic for property investors worldwide. Studies show that the UK housing market has bounced back largely after the global financial crisis. The international investors continue to be attracted by this property and at the prospect of owning a chunk of the British property market.
REASONS TO INVEST IN UK PROPERTY IN 2017
The United Kingdom is one of the most attractive real estate markets in the world, with features that make it distinctive.
CURRENCY: Owing to its currency, the Pound Sterling is the 3rd largest and one of the strongest in the world. Its capital being the world’s capital for foreign exchange trading.
AFFORDABILITY OF HOUSING: Statistics show that the house prices across this country are 6 to 7 times the annual salary on an average.
INTEREST RATES: The cost of borrowing related to a property investment is indicated by the interest rates prevailing in an economy. This rate is in the lower 15th percentile when compared globally and is monitored and controlled by The Bank of England.
FUNDING ABILITY: With an investor friendly funding market, the country has easy accessibility to investor and development finance.
EMPLOYMENT: With 6 to 7 percent of the working population being unemployed, the landlords in the country get a unique social housing opportunity, with respect to the housing benefit scheme in the United Kingdom.
HOUSING DEMAND: The United Kingdom Parliament forecasts a shortfall of 250,000 properties per annum, which will ultimately increase property prices within the United Kingdom over the next 10 years.
RENTAL YIELDS: High rental yields between 10 to 20 percent per annum are enjoyed by experienced property professionals, varying according to the investment strategy, area and type of property.
CASH FLOW AND CAPITAL GROWTH: A high and positive cash flow is generated because of this difference between high rental yields and the low of cost of borrowing, hence, creating a unique opportunity for investors, especially in The Midlands and areas in the North of England.
Stronger capital growth is offered by other areas of the South East England and the capital city, London. Therefore, the UK property market has an offering for both cash flows and capital growth (Moose, 2017).
In this dynamic world, it definitely has certain trade-offs :
1. Fierce competitiveness, especially in the fashionable areas of some major cities such as London, Bristol and Manchester.
2. The continuous costs involved in owning this UK property. Failure to keep up with the payments can lead to huge penalties and potentially loss of this property.
Nevertheless, UK expats and overseas investors have great opportunities to derive benefits from investments in UK property in the following years (Thesun.co.uk, 2017).
THE BENEFITS OF EXPAT INVESTMENT IN UK PROPERTY
A lot of expats move out from the UK and work hard in countries of their choice. Being unaware of tax benefits in UK, they end up selling everything in their home country and transfer their money abroad. This money ultimately sits in banks in these overseas countries, not contributing to any growth for these UK residents. The sunshine and relaxed way of living has its own pros and cons, but in this dynamic world, this sort of a lifestyle is overpowering these benefits. The money held in the banks loses its spending power and the income from work and the interest on savings, leads to additional taxes.
The realization that is essential for all these expats is if they use a part of their savings to invest in UK property, they could:
1. Have a foot holding in the UK
2. Earn tax-free income, which will be equivalent to their life in the UK
3. Hugely benefit from the capital growth, UK being one of the best property markets in the world
A good passive income can help a family live life they aspire to, ultimately leading to achievement of their life goals. During the financial crisis and Brexit, a lot of people were heard talking down London property, ‘London was overcooked’, ‘Don’t buy London’, ‘Stay away or lose your shirt’. I believe tax changes, mortgage changes and Brexit have all made it less attractive but not less attractive than other nations and their strategies. I feel it has only made London a little less attractive than its own previous self. I certainly believe, in terms of property, UK is one of the strongest nations worldwide. Attractive and competitive pricing, flexibility of the developers and best discounts because of the fall of the sterling pound have and will set it on the path of growth again (Alegre-Wood, 2017).
The main highlight of such yield-driven property sectors is that the income earned from this investment, increases our potential for capital growth when reselling the property.
Hence, seeking financial advice becomes essential, in order to align the benefits of such huge property investments with our goals and objectives.