It is no secret that the last few years have been somewhat challenging for property investors looking to the UK. From the uncertainty that followed the Brexit negotiations to the COVID-19 outbreak completely upheaving our way of life, at least for the time being, it would not be surprising if you felt it currently counter-intuitive to invest in UK property.
On the contrary, now could be one of the best possible times to invest in a UK property. Whether it is your first time buying or you are adding to a wider portfolio, we’re currently witnessing a ‘perfect storm’ of reductions, coupled with low rates and currency benefits that may never be seen again in our lifetime – all while the generally less experienced ‘hobby landlords’ continue to drop out of a market that is set to trend positively in the future.
Stamp Duty Land Tax Reductions
In July 2020 the Government announced a temporary Stamp Duty Land Tax (SDLT) reduction on property sales in an attempt to kickstart the housing market after lockdown. Available on properties in England and Northern Ireland until 31st March 2021, this means that Buy-to-Let investors now only pay 3% SDLT on purchases up to £500,000, which could mean savings of up to £15,000 when buying during this period, you can get a cash offer on your house here. While this is a huge benefit for UK residents, it is particularly appealing for any international investors that are interested in UK real estate. These investors should consider investing before 1 April 2021 – at this point, the SDLT rates will revert back to normal on top of the additional 2% surcharge that is due to be enforced, as announced in the Budget in March this year.
With the Bank of England Base Rate remaining at a historic low of 0.1% after two successive cuts in March 2020, many lenders are now offering incredibly competitive Buy-to-Let mortgage rates and a raft of new products.
While this is excellent news for first-time investors, it is also providing portfolio investors the opportunity to remortgage existing properties, release equity, and leverage new investments.
International Currency Benefits
The pound continues to be weak when measured against dollar-pegged currencies such as Hong Kong and the United Arab Emirates (UAE), providing plenty of opportunities for overseas investors to find value in foreign exchange. While UK property has always been popular due to relative affordability and historical performance, the Coronavirus outbreak has contributed to significant potential savings, meaning investors can maximize their value for money in the UK.
Similarly, while the stock market crashed between 25 and 30% in March, the property market remained strong, proving itself once again as arguably the most stable, high-yielding asset for investors seeking less volatile and more long-term alternatives.
Long-Term Growth Potential
It remains to be said that, despite the obvious challenges the market has faced, the outlook for property remains positive. Following lockdown, many companies have each described ‘long-term optimism’ in various property market forecasts, explaining that despite lower transaction volumes, the property market (including mortgage lenders) is in a better place to bounce back than it was following previous crises such as the last financial crash. Rental growth is still trending positively and demand continues to rise. Most rental market growth forecasts estimate increases throughout the next five years – some expect a 13.6% rise, while others are forecasting 10% growth and 8.5% growth respectively over the same period. Fortunately, the rental market has also adapted well to the ‘new normal. Letting agents have largely re-evaluated the wider process and are now able to deliver online viewings, provide delayed agreements and attract a tenant base that is increasingly looking for the next move.