Reasons for investing in UK Property


Why Should I Invest in UK Property

When people think about what is meant by investing in property they normally only think in terms of wealth creation. Although this is usually the majority reason it is far from being the only reason. Certainly money is usually a factor but not necessarily the accumulation of money as often there are other determining factors that come into the equation.

As we mentioned in the initial guide, one of the first considerations for anyone considering investing in property is to understand your true reasons for making a purchase. Only when you have accurately established your reasons will you be able to fully and unequivocally carry out the research needed to ensure you make the right decision for you.

Common reasons for investing in property

  • Property renovation– In some ways this may not be termed investment as the aim is generally to buy renovate and sell in as short a time as possible. Nevertheless, it is often the first thing people consider doing and for many, has been a very successful way to build wealth quickly.
  • Building a property investment business – Where this is the goal, acquiring a portfolio of properties will likely be the aim and where the business may hold a mixture of rented properties as well as properties being renovated for later sale or rent.
  • Buying investment property to provide support in retirement – Many people approaching retirement may have accumulated good levels of savings or received redundancy payments or lump sums from pension plans. Often these people will consider investing that capital into property to provide a rental income during their retirement while ensuring that they have something to leave to their offspring when they die.
  • Investing in a holiday home property – Many people will purchase a property to use as a holiday venue for themselves and their family. In this case the aim is not about wealth creation but more to do with personal lifestyle values. The considerations here will still obviously be that the property will increase in value and have the ability to attract rent while not in use by the family but the ultimate intention is towards enjoyment.
  • Providing for children going to university – a common reason for property purchase by parents of students going to universities that are located in cities away from the family home is to provide secure and settled accommodation for the student throughout the term they are at the university. Often the student will share with friends who will pay some rent to help with the costs. When university is finished often the property will be sold and hopefully the parents will have achieved a lower overall cost than would have been the case had the student been in rented accommodation.
  • Purchasing a future retirement property – People considering retirement often would like to settle in a different area such as near the sea or in cities where they can be near good quality hospitals and care facilities. Often, by the time they decide to do this, costs can have spiralled or the ideal property does not come up for sale. One solution is that while still in middle age and an ideal property comes to the market, it can be purchased as a buy-to let and rented out. When the time comes to retire then the family home can be sold and the retirement property removed from rental and be refurbished and made ready to move in. This way, couples can be certain of having their ideal retirement home waiting for them and hopefully increasing in value and producing income in the meantime.
  • UK expats buying property for future residency – Where UK expats are working overseas but intend at some point to return to the UK, purchasing the property they want for the future and renting it while they are overseas will let them finance the property while they are earning, often tax free, and may help to provide them the future security and lifestyle that they would like.
  • UK expats with high income entering the buy-to-let (BTL) market– Many UK expats have very high incomes and want to put their spare cash into some form of investment. Often they see UK property as a traditionally secure place to put their money and will turn to investment in buy-to-let property as their way to do this. Being overseas usually means that they will utilise a letting agent to handle the day to day running of their portfolios and because of this they can benefit by creating their portfolios in parts of the UK known to provide the best property value growth and the best rental incomes, maximising the outcome of their investments.

A look at the UK property market in 2017

Here is an extract from some recent report taken at the end of 2017 which give a little insight to how the UK property market moved during the year. The information takes a look at some sample cities in the UK

  • Cheltenham –  house prices in Cheltenham grew at the fastest pace in the UK during 2017 which showed the Gloucestershire town experiencing price rises of up to  by 13% in the year. This brought the average house price to £313,150, according y one lender.
  • Perth – Perth in Scotland experienced the biggest fall in prices of up to 5.3% bringing the average house price to £180,687 according to one lender.
  • London and the south east – Most of the biggest gains were in London and southern England according to one lender.
  • Yorkshire and Humberside – These areas recorded the biggest falls within England according to one lender.
  • Bournemouth and Brighton – Bournemouth recorded the second-biggest rise with prices climbing by 11.7%, while Brighton came in at number three with an 11.4% increase according to one lender.
  • Average UK house price growth – The average increase in house prices across the UK was 2.7% according to the Halifax which based the figures on its own mortgage data.

Information buy one major lender indicated that a number of towns and cities have recorded significant rises in house prices over the past year, with all of the top 20 performers recording growth of at least double the national average.

Unlike 2016 the top performers are not exclusive to London and the South East with the top spot now belonging to Cheltenham in the south west and towns in east Anglia, east Midlands, the north west, Wales and Yorkshire and the Humber also making the list.

As seen above from the short list of potential situations that property purchasers may need to consider and realising that not all are simply based on increasing wealth, we can begin to understand to first statement in guide 1 that knowing exactly what your reason is for investing in property is vital if you are to make a success of it.

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