The pound is low, and the cost of living is rising along with inflation. But despite the chatter in the media and news headlines warning of economic chaos, there are opportunities in the current market for those who want to invest in UK property. Savvy investors look beyond the headlines and the scare tactics of the UK media and understand what creates a positive long-term investment opportunity, and so we do.
Banks and building societies such as Halifax and Virgin Money have pulled their offers and raised prices in response to rising inflation and general unpredictability in the market. Understandably, there is uncertainty right now. It has left investors wondering whether they should bid their time and see how it plays out, or maximize the investment opportunities that are out there right now.
Interest rates are just one factor of many that underpin the long-term success of an investment property in the UK. Let’s look at the opportunities in the UK property market that investors could benefit from:
Increased Opportunity for Overseas Investors
UK-based buyers will inevitably begin to feel the pinch due to the cost of living crisis and rising energy prices. The extra cash they may have saved for investment may now be held onto a little more tightly, but this opens doors for overseas investors. There are more buy-to-let opportunities out there, as UK buyers may be holding back. For investors based overseas, the falling pound is likely to provide added incentive to invest in UK property now.
This is because those buying from abroad will find UK homes far cheaper than they are during times of strong sterling performance. A similar situation occurred after the pound fell considerably in the aftermath of Brexit. Those from the EU were on average able to realize discounts of around 16% on property in the UK as a result of the falling pound. Expats can earn very good money from investing in UK property as their living costs are often much less than in the UK and there are tax savings to take advantage of.
Increasing rental demand and increasing rental yields
We witnessed a significant increase in private rents before interest rates were pushed up. We’re expecting the demand for rental properties in Birmingham to increase. In fact, it is predicted that by 2025 over 50% of adults under the age of 40 will be in private rented accommodation. In the UK, demand from renters is 43% higher than the last five-year average. The rising cost of living and exploding mortgage rates means that saving a deposit and affording the monthly costs of a mortgaged home is unattainable for many, so there’s an increase in rental demand.
The ‘homeowner’ mindset is shifting, and the benefits of renting are coming to the forefront of people’ minds. Renting gives people more freedom to move for reasons such as work, a better quality of life, or being closer to family without the fees and red tape. We continue to see uplifts in rent on properties in Birmingham in line with the current situation in the UK and increasing rental demand means increasing rental yields.
The UK has been popular with overseas investors for many years. Now that the value of the pound has fallen, investing in property in the UK is even more attractive, especially for countries with strong currencies. If you have capital in overseas currencies, there has never been a better time to take advantage. The currency discounts available means there are more opportunities available for international buyers. Add to that the fact that the UK housing market has continued to perform strongly throughout recent adversity, creating further confidence in the sector and you have a positive market for investors who have overseas capital.
Although London has traditionally been the city’s overseas investors are flocking to, international buyers are now showing an interest in other areas of the UK, like Birmingham where houses are more affordable. Investors can take advantage of stronger house price growth and rental yields and increased investment thanks to projects like HS2 and the Commonwealth Games. International buyers can maximize their budgets and first-time investors can get a fantastic deal on rental property in Birmingham as the city continues to grow and thrive. For overseas buyers, this is a window of opportunity that needs to be taken.
Tax Break for Landlords
On 23rd September, Kwasi Kwarteng’s mini-budget hit the headlines. 2 weeks is a long time in politics, and the UK economy has a response. The Bank of England intervened with an emergency £65bn bond-buying program and energy bill discounts are coming into play this month. Included in the budget was the announcement of a tax break for landlords which will see a variety of benefits:
- The nil-rate threshold for stamp-duty tax doubled from £125,000 to £250,000 in England and Northern Ireland
- A buy-to-let property costing £250,000 will have a stamp duty bill immediately cut from £10,000 to £7,500
- Professional landlords who hold their properties in a limited company will benefit from annual tax savings of tens of thousands of pounds due to the reversal of the planned corporation tax rise
This announcement is again an incentive for landlords to expand their portfolio, or for investors to take the leap and begin their UK property investment journey. It’s a challenging time and we are making every effort to keep up to date on the latest developments, trying to evolve with the market, and responding to changes quickly. As always, our main priority is supporting a bright financial future by offering a totally unique approach to the UK property investment market. To discuss how you can maximize your investment in the UK, get in touch with our expert team today.