With inflation not only hitting double digits but doing so sooner than expected, households all over the country are tightening budgets and looking for ways to save and make their money go further. This is also the case for investors. Amid ever-changing markets, the current recession adds to the pressures of finding consistent returns, but the property sector is one place where investors can find opportunities to generate a stable profit.
Property market performance
Despite experiencing the first price drop this year, the UK property market continues to perform strongly since the boom during the pandemic. With the start of lockdowns, house sales outperformed industry predictions for an extended period. The below chart shows how the average property prices across all house types changed between the start of the pandemic in early 2020 and the summer of 2022.
House prices have been on a steady rise over the last two years, with the average asking price growing by 23% – its quickest rate in 18 years.
The average UK home is now worth £365,173 with the East Midlands seeing the strongest annual growth. However, August marked a few slowdowns as prices fell for the first time this year – by 1.3% versus the previous month. The annual growth rate of property prices was also found to have reduced to just over 8%, a decline of 1.1% from the previous month. However, these market changes aren’t unusual and experts at Rightmove assure that the latest price drop is in line with the 10-year average, and it can largely be put down to a seasonal lack of buyers, which is expected to return in the autumn.
Despite these declines and inflation keeping asking prices high, the UK property market remains active and doesn’t appear to be short of demand. The private rental sector has been experiencing its fair share of bidding wars among tenants, making it very competitive as many renters struggle to secure a home. As a result of high demand, landlords have been hiking up the monthly rent as well as upfront costs. A key contributor to this intense competition is reduced supply. Researchers at Propertymark found that rental properties available through estate agencies almost halved between March 2019 and March 2022, and this dropped further by 26% year-on-year.
For property investors, there are plenty of positives to take from the current state of the UK housing market. Despite the current economic downturn, prices remain high and demand stays healthy, so there are several ways for savvy and experienced investors to take advantage of the current climate.
Property investment strategies
There are many ways to get the most out of property investing to match your objectives and priorities. Here are a few strategies that we recommend weighing up if you’re ready to step onto or move up the property ladder:
1. Timing is key
Whether you’re thinking about buying physical property or investing in passive methods, timing will have a huge impact on the returns you could generate. Before making a commitment, you should understand:
· Your financial stability – can you afford it? Are you a cash buyer or will you need a mortgage? Have you thought about the upfront and maintenance costs? What is your time horizon?
· Market health – consider the market conditions before entering and property investment. For example, what is the average asking price and what are the future projections? Which regions are offering the strongest yields and growth? What are the interest rates?
2. Buy-to-let vs buy-to-sell – A common property investment method is buy-to-let. This means buying a property (either outright or via a mortgage) and renting it out to tenants. This generates a rental income. Buy-to-sell (or ‘flipping property), means buying a property to refurbish and selling it at a higher price. While both strategies can offer attractive returns, one may be more suitable than the other based on your goals and motivations. Buy-to-let offers long-term growth with a regular monthly income with potential downsides such as tricky tenants or vacant periods. Buy-to-sell, however, is suitable for quick and maximum returns with potential downsides of the large expenses required to improve a property and no guarantee of a sale at the end.
3. Holiday lets – These are properties that are purchased to rent out to holidaymakers on a short-term basis. For the right property in the right location, holiday lets can offer significant returns and double up as a holiday home for yourself, but it can also lead to extended void periods, particularly in off-peak seasons, and could be quite time-consuming in terms of admin and marketing the property.
4. HMO properties – Similar to BTLs, Houses of Multiple Occupancy are rented out to multiple tenants. Some of the main benefits of HMOs include the potential for high rental returns due to having several tenants, which could also reduce the chances of vacant periods. On the other hand, HMOs could be more expensive and time-consuming to manage and there are several housing regulations to abide by depending on the number of tenants.
5. Bonds – Many investors opt for bonds to generate a reliable profit from property. But as with any other investment type, bonds can vary massively, and each will have its own pros and cons. If you’re considering investing in property bonds, you could check the asset type that the bond invests in, your time horizon, variable versus fixed rates, and your preferred payment frequency.
There are many different property investment options to consider, all of which will present various opportunities and fallbacks depending on your aims. Ultimately, weighing up your options and doing your homework can help to narrow things down to a strategy that will help you get the most of out your investment. Once you’ve gained a good understanding of the right path for you, be sure to take its diversification opportunities into account. In other words, how will this investment benefit your portfolio? Will it help spread the risk and reduce any potential impact?
How to get consistent returns from property investing
If you’ve found that property bonds are best suited to your needs, Propiteer Capital can help with an easy and convenient way to grow your money. The Propiteer Capital Property Bond is a fixed-profit listed bond with exposure to high-quality UK and Irish developments in three asset classes: Residential Properties, Branded Hotels, and Development Properties.
Our property bond offers three profit options with varying terms times and rates of return. You can choose to be paid monthly, annually, or invest for the long term to maximise your exposure and profits to our high-demand developments. We also offer added peace of mind securing your funds against asset-backed projects, spread across a diverse property portfolio.
Whether you’re looking for your next property investment or diversifying your portfolio, our attractive returns combined with fixed rates make planning for your financial goals easier in today’s volatile market. To find out more about us, the Propiteer Capital Property Bond, visit our website or follow us on LinkedIn for regular company and market updates. If you have any questions about getting started with us, you can reach our friendly customer service team at info@propiteercapialplc.com or on 01376 319 000.
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