Louise | Property Venture

UK post-Covid property hotspots

Location Location Location!

Which ones are going to do better out of Covid?

Given recent news that Continental Europeans have gone back to work quicker than we have in the UK: with 84% of office staff back at their desks in France, 76% in Spain, yet 37% in the UK, some city-centres are suffering more than others.

As an overall observation many of the Continental city sizes do not mirror those of the UK. In France, Paris has just over 2 million inhabitants and its second city Marseille c. 900,00. Whereas London has a population of 10m and Birmingham 2.5m.

Whilst the ‘Stay at Home’ message in the UK is now proving difficult to overturn, there are nevertheless challenges with highly-populated cities. Sheffield has 18% city workers back in the office, Manchester has 15%, Birmingham 14% and Leeds and London have 13%.

Some of these regional UK cities are also proving to be rental hotspots. Central postcodes in Cities like Bradford and Liverpool offer average yields close to 10%, whereas the suburbs in places like London can still work for rentals, like Enfield or Croydon.

It’s time to think about the location of your investment particularly for expats who might want to invest ahead of the SDLT holiday ending at the end of March 2020 and the 2% overseas buyers SDLT surcharge coming into force in April 2020.

If you would like help finding the right buy-to-let properties for you then please get in contact.

My business focuses on helping time-strapped expats and busy business people who don’t have the local presence, or capacity, to acquire the targeted amount of properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.

Compliant members of the PRS scheme and on the Advisory Board of the Association of International Property Professionals (AIPP) the business has been vetted, approved and voluntarily commits to Industry Regulation and the Professional Code of Conduct. We are known for our quality customer service and non-pressurised approach to sales. This is what our clients say

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

COVID Rewrites UK housing rule book

In June the UK property market was buzzing with activity. This was odd just re-emerging from Covid. But would that housing market activity translate into sales?

We are learning the rulebook has been rewritten as the post-lockdown mini-property boom accelerates rather than slows down.

There is normally a seasonal slowdown in housing market activity over the Summer months, as both buyers and sellers turn their attention to Summer holidays. This usually translates into a softening of house prices of around 1.2%, an August fall, which has been the experience for the last 10 years.

But this year, there is an un-seasonal record high for new seller asking prices in seven regions, although London drags down the national average to a 0.2% fall due to its own more typical 2.0% seasonal monthly drop. Prices are more buoyant in places like Devon and Cornwall as people seek out-of-city dwellings and prices reach record levels.

Rightmove’s August house price index shows the highest number of sales agreed in a month since over ten years ago, up by 20% on the previous high, with a record total value of over £37 billion*.

There is the obvious pent-up demand filtering through and perhaps people reassessing their housing needs

Rishi Sunak’s SDLT holiday until the end of March ’21 has stimulated, not just home buyers but property investors and expats too, trying to pre-empt a 2% SDLT surcharge levy being introduced April ’21 for overseas buyers. Overseas buyers will pay the new 2% surcharge in addition to the existing 3% surcharge.

The lending market has been jumping around a lot as lenders try to find their ‘new normal’ with LTVs lowering and deals being pulled. The ‘shifting sands’ creates problems for investors not knowing whether they can rely on a lending facility they thought was there. This looks as though it might settle a bit but then the big challenge is how will lenders behave come October when the ‘Furlough’ scheme ends and more unemployment bites.

UK Regional property market

As ever there is a regional and segmented picture, not just one national one. In the East Midlands there has been a 3% rise in property investor inquiries since the SDLT holiday announcement. **

London seems to be suffering the most for landlord returns, this can be partly explained by the fact that rents have gone up considerably over the last few years and so there is a rebalancing but also current supply in London isn’t matched by demand, whereas cities like Bradford and Sheffield don’t have enough.

Interestingly rents have been rising with the average rent up 1.5 per cent at £965 from June**

Don’t work right to the SDLT deadline

The reality is that record levels of buyer activity lead to processing delays and mean that patience is required to get sales agreed to completion so investors might not want to work right up to the deadline of the SDLT holiday

Source: *RightMove August 2020 ** Zoopla July 2020

If you would like help finding the right buy-to-let properties for you then please get in contact.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: expat investors, housing, UK investment

Does Expat property Tax have to be taxing?

I have lots of property conversations with expats and there is always the thorny issue of what’s the best way to set up property investing tax-wise. So how to simplify a complex issue?

There are a few things worthy of consideration.

Should Investing be personal? Or via a Special Purpose Vehicle?

One of the challenging questions is how to set up your investing at the outset; buying personally or going down a Special Purpose Vehicle (SPV) route, which could be via a Limited Company (Ltd Co.) route or a Limited Liability Partnership (LLP) route.

Evidently everyone needs to have tailored advice for their personal situation, but are there any Rules-of-Thumb or principles that can be borne in mind?

Level of Borrowing

A key determinant is how you are going to finance the property purchase. If you plan to have a lot of borrowing, then it is worth giving serious consideration to buying via a SPV otherwise you could end up paying tax on ‘nominal’ income, given how the mortgage interest tax relief works for personal investments.

Prior to April 2017, landlords could deduct their entire mortgage interest costs as expenses against the rental income they earned. They would then pay tax at their personal tax rate on the remaining profits. Now though, mortgage costs are not treated as an expense, a 20% tax credit is used instead. This means higher-rate taxpayers are hit hardest and basic rate taxpayers could be drawn into the higher rate tax bracket unwittingly, by virtue of gross rental income being added to other forms of income.

Company structure

Limited Companies have a different tax structure, with Corporation Tax levied, currently at 19% for profits generated. And if you choose to take dividends as a way of extracting profits from the company, dividend tax is applicable in addition (current rates), but you can time your dividend payouts for maximum tax-efficiency, or leave the profits rolling up within the company to buy the next property. A Ltd Company can help with IHT planning as well. Stamp Duty Land Tax (SDLT) still applies though.

So there is a constant tension and balancing between mortgage interest deduction, Stamp Duty Land Tax and the various other tax rates.

There are some accessible things you can do if married. You can apportion ownership between spouses – via a Declaration of Trust and assigning Beneficial Interest. Bear in mind you can’t just shift income between spouses, unless it is matched by a commensurate capital holding, or aligned with beneficial interest.

You can also do 90:10 split in a LLP vehicle.

Property Price point

The solution might be different whether you are buying at an accessible price point in the Midlands and up North, or at a higher SDLT tax band in London or the South east.

Non-resident investors used to be able to sell property free of Capital Gains Tax but that is no longer the case.

Number of properties

If someone is just starting out with 1 or 2 properties vs a portfolio landlord with 4-5+ properties, it is important to have a view at the outset of how many properties you intend invest in. It is harder and more expensive to switch from a personal investment to a Limited Company, but it is possible to hold properties in a mix of ways.

Nature of buying – trading or investing?

Are you a property trader or investor?

If you buy a property to make value-added improvements and sell on for a profit, you’re a developer or a trader. So you are likely to be better off buying as a limited company, given you have more flexibility for taking profits. As an individual you are more likely to have your gains taxed as income.

If you are a buy-to-let landlord you fall more into the investor camp. Traditionally investors have operated as personal investors, but some could benefit from using a limited company since the 2017 tax changes.

Personal vs Ltd Company mortgages

It’s important to consider the whole picture, not just tax. Lending is approached differently for a company vs personal secured borrowing so you need to also consider ability to borrow. Whilst there are more lenders who offer mortgages to Corporate bodies now, there is still more limited choice than for personal lending and what there is for Ltd Companies, usually comes at a premium to personal lending.

Top Tip – You need to take care unless you are holding – or plan to hold – a lot of properties – that you don’t end up spending more on the investment structure than you actually stand to make

Based on content from a Webinar interview by Louise Reynolds with Churchill Tax advisers

If you would like help finding the right properties or tax help then please get in contact.

My business focuses on helping time-strapped expats who don’t have the local presence, or capacity, to acquire the targeted amount of properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: expat investors, Expats, Property tax, UK investment

How to ensure a property investment deal will work?

Nothing in property investing is certain or guaranteed, but there are some things you can do to set yourself up for success.

How about starting at the end and working your way backwards?

It’s a given that you ought to have a number of exit strategies in mind before you buy an investment property. Taking just one of these, the Buy-to-Rent or Buy-to-Hold strategy.

Who are your ideal tenants?

Say you are seeking long term professional tenants as a family unit. What type of property will they be attracted by? And what is their rental budget likely to be?

For a family with parents who commute into a city centre to work, then number of bedrooms and proximity to transport links are likely to be important factors. Whilst studios or 1 bed flats or a HMO will bring in higher yields, you will be trading off a more modest yield for other factors such as minimising voids, longevity of tenant and potentially lower operational costs; refurbishing or sprucing up between tenants as well as no leasehold costs (usually). Other factors might be the quality of the neighbourhood, proximity of local shops and medical facilities. And let’s not forget broadband in the current era of home-working, it has become ever more crucial for parents as well as children. And so has air pollution become an important factor for many households, which can be found on sites such as https://uk-air.defra.gov.uk, and cycle routes at https://bikemap.net.

Due diligence ahead of buying will pay off

Due diligence is really about researching and checking things out. Contacting local lettings agents who will have insights into what lets really quickly and what is in short supply. I remember a field trip to Harrogate last year on a due diligence trip and heard a good letting agent inform a developer that the town was short of 1 bed homes just at the point a developer was about to invest in another property. That helped shape her decision on which deal to go for, an HMO. Letting agents may even be a source of referrals to landlords thinking of selling up.

You can use online portals and tools to give a dipstick overview of demand e.g. Rightmove, by checking numbers of 2 or 3 bed houses To Let and Lets Agreed to get a measure of the levels of supply and demand.

Is it mortgageable?

It’s also worth bearing in mind what is and isn’t easily mortgageable. For the most part there are more issues with flats than houses, but still some houses of Non-Standard construction or some ex-local authority stock can be problematic.

If you would like help finding the right buy-to-hold property for you then please get in contact.

I work with time-strapped expats and entrepreneurs who don’t have the capacity, local presence or gaps in their know-how to build property portfolios in the right way for them. (Or who are simply stuck with little progress). This means you can carry on your day-to-day lives without spending disproportionate time getting sucked into investing.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: air pollution, Infrastructure, tenants

Ten Tips to Covid-proof your property buying?

Having read Ian Cowie’s share-buying column in the Sunday Times I thought his tips are universally applicable to property investing. So here they are – repurposed for property.

The virus knows no national borders.

You might want to consider investing across borders or within one country, like the UK. Think London and the North East and how they are at different stages in the crisis.

Invest in tomorrow not yesterday’s story.

What delivered best headline returns last year, may not now. Think about micro-apartments vs vanilla buy-to-lets. In a crisis, regular sized homes in mainstream towns and cities – with less ‘racey’ headline returns – have arguably won through.

You don’t get paid until the cheque is cleared.

Bear this in mind when doing due diligence on a property purchase. It might look a great deal, but realistically, is it going to work and pay off.

Expect the unexpected.

Contingency planning and stress-testing is so important when your property projects span more than the short-term, like investing with developers, or off-plan buying.

When facts change, investors must be willing to change their minds.

Sometimes it can mean cutting losses or divesting a portfolio of a property that no longer fits your strategy.

It’s a fantasy that property buyers never make a mistake.

This goes for property buyers and the property industry as a whole. If someone is claiming to be infallible, ‘buyer beware’.

Aim to be in a property sector that will always be in demand.

Family lodgings are pretty essential. Retail space – however – is unlikely to be in great demand moving forwards

Be suspicious of statistics, trust facts.

In our heavily-curated, social media world, people can seem what they are not. Using factual sources of information as input to ‘Due Diligence’ is far more useful.

Property people can do well by doing good.

There have been some tragic cases of investments not working out. Look for those who act in the right way and do what they say they are going to.

Beware short-termism

We can all get spooked by short term events, but often those who are riding out the storm tend to win the day.

If you would like help with planning ahead, understanding and preparing for these eventualities as an investor then please get in contact.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: home-buying

Which European country to emerge strongest from COVID-19?

The World Trade Organisation expects global trade to contract by more than during the financial crisis. And the IMF believes the coronavirus crisis will exact the biggest toll on the global economy since the 1930s Great Depression, with advanced economies contracting by 6.1 per cent and emerging economies by 1 per cent in 2020.

Which country will emerge strongest for property investors?

As Continental Europe makes tentative steps to break its quarantine, with Austria, Spain and Italy loosening some of its rules, France, UK and Germany watch closely to help inform their pathways to normalcy. Brussels is expected to present an EU-wide blueprint for lifting restrictions for a co-ordinated exit.

France – a favourite for lifestyle investors

Emmanuel Macron is preparing to gradually lift isolation orders in May, which currently stipulate people can leave their homes only to go to work, buy essential supplies, help the vulnerable, seek treatment or take exercise nearby for an hour a day, alongside a curfew.

For every week in confinement in March, French business activity dropped by about a third, the central bank said. The decline in the French economy is set to be of a similar scale to the second quarter of 1968, when gross domestic product fell 5.3 per cent because of the impact of a student-led protest movement (according to the Central Bank)

The property market in France is highly regulated and prices are – on the whole – more stable than some other European countries. Bigger cities and places which attract international holiday makers have tended to see more buoyant prices in the recent past, like Paris, international ski resorts like Chamonix and holiday home hot spots like the Côte d’Azur. Prices in these sought-after places have further to fall, so if unemployment hits other countries badly, there are likely to be less international buyers and prices could fall.

Italy charms property lovers

Italy’s gross domestic product is expected to fall by 6% this year (Confindustria’s forecast) and public debt reach towards 150% of GDP, with thousands of its 60 million population seeking state-backed income support schemes.

Italy has been pushing – alongside Spain – for a financial support package to support the Southern European countries which have been harder hit than the Northern countries. The current offer of a €500bn economic package involving the region’s European Stability Mechanism bailout fund has caused anxiety in Italy given the suspected stringent repayment conditions that might be levied.

Italy did not win any explicit reference to the concept of “coronabonds” — jointly issued debt underwritten by eurozone member States.

Property prices in tourist hot spots like the Amalfi coast or Tuscany or its Lakes, might come under pressure.

Germany renowned for stability

Germany’s economy will shrink by almost 10 per cent in the three months to June, according to the country’s top economic research institutes — the sharpest decline since quarterly national accounts began in 1970 and double the size of the biggest drop in the 2008 financial crisis. But some forecasts then see it rebounding in 2021 with growth of 5.8 per cent.

Both Germany and France showed weaker economies pre-Covid-19. Germany narrowly avoided a recession in 2019 as its manufacturing industry was hit by the US-China trade war. France’s economy contracted in Q4 2019 as a result of widespread strikes and protests.

One buoyant part of the German economy was the service sector, but this crisis is affecting services harder than manufacturing, as industrial production has continued.

The crisis is expected to increase the number of unemployed people in Germany by 236,000 to 2.5m, pushing the jobless rate up from c. 5 per cent to c. 5.5 per cent. That would remain well below the jobless levels of many other eurozone countries; the bloc’s overall unemployment rate recently hit a 12-year low of 7.4 per cent.

The aid package in response to the crisis will push the country into its first budget deficit for several years, equal to 4.7 per cent of GDP, increasing public debt from c.60 per cent of GDP to 70 per cent.

In Germany the proportion of people who have died after a corona diagnosis is just 2 per cent, compared with 13 per cent in Italy and 10 per cent in Spain.

Property in Germany’s main cities like Berlin have performed well for investors over the last few years, particularly for non-domestic investors looking for an alternative stable housing market in the lead up to Brexit. Property prices in these cities may well cool as international buyers take stock.

UK – in demand among expat investors

GDP is forecast to decline by just over 5% by the IMF, slightly more than Germany and France.

A three-month lockdown could cause government borrowing to rise by £218bn to £273bn in 2020-21. That would take the deficit to 14 per cent of gross domestic product, the highest since the second world war and well above the financial crisis peak of 10 per cent (OBR).

Comparisons have been drawn with the Credit crunch of 2008. During the credit crisis UK property prices declined 19% from a peak in Sept 2007 to a trough in March 2009 (Land Registry). But the UK government stimulus now is more than tenfold the stimulus package in 2008 and it is this which will help determine how quickly and by how much the economy recovers by.

Regarding property, experts predict transactions will fall by 60 per cent in Q2 reaching a nadir in June. The Royal Institution of Chartered Surveyors predicts a drop in sales to the lowest level seen in 20 years.

On prices – Estate agent Savills predicts a fall of between 5 and 10 per cent in the short term, with prices cushioned by low interest rates and lenders’ flexibility on arrears, reducing forced sales. The longer term impact on prices is likely to depend heavily on economic factors such as growth, earnings and unemployment.

The UK has long had a supply: demand imbalance and the building industry has been trying to keep up with the annual supply of houses. That remains the case and is now exacerbated by vendors not being able to come to market. A significant risk currently is delays in new schemes coming to market, with different parts of the supply chain getting back up to speed after the crisis.

Some expats are still considering their investment plans given the introduction of the 2% stamp duty land tax surcharge for non-UK residents from April 2021.

Spain a big holiday home market

Spain’s economy is possibly set to suffer the most from coronavirus crisis. With limited fiscal room for manoeuvre, Pedro Sánchez’s Socialist government needs help from the EU.

Recent UniCredit research suggests that Spain is set to suffer more from the crisis than any other European economy, estimating a 15.5 per cent decline in gross domestic product in 2020 and create a fiscal deficit of 12.5 per cent of GDP.

Other economists argue that a 10 per cent drop in output and a deficit of 10 per cent of GDP are likely. That would bring total debt to at least 120 per cent of GDP — up from a previous level of just under 100 per cent — even before measures to rebuild the economy are contemplated.

Social security figures at the beginning of April showed that more than 800,000 people have already lost their jobs out of a labour force of around 19m. Unemployment in Spain was already 14 per cent before the crisis hit.

Such figures are a big reason why, despite resistance from northern Europe, Madrid is pushing for mutualisation of debt and EU-backed “coronabonds”. Whilst a €500bn financial package has been agreed, it falls short of this sharing of debt pushed for by Spain and Italy.

Spain’s economy is particularly vulnerable, owing to the high proportion of people on temporary contracts – the highest level in the EU – which has already declined by 17 per cent, compared with just a 2 per cent fall in permanently employed staff. The reliance on the service sector, including tourism, which has been knocked badly and the preponderance of small and medium-sized businesses.

Spain has limited room for manoeuvre and has been less generous than other European countries; companies are required to go on paying salaries on the understanding that their employees will make up lost hours before the end of the year.

Spain’s €100bn loan-guarantee scheme for businesses falls far short of the UK’s £330bn programme, let alone Germany which has no upper limit in place currently.

By the end of March Spain had put in place discretionary fiscal measures and guarantees worth around 12 per cent of GDP, compared to 18 per cent in the UK, 23 per cent in France and closer to 60 per cent in Germany (Think Tank Bruegel).

Conclusion on European investor markets

Many countries in Europe will need to pay for the financial support packages offered to their citizens and businesses and so this is likely to impact local taxation in a number of European countries. Southern European countries might struggle more than the Northern ones to recover.

First-time buyers and investors might be affected more in the aftermath of COVID-19, given they tend to seek higher loan-to-value mortgages. Lenders are adjusting and tweaking their offers on a daily basis to encourage or stem the flow of business as circumstances change. Lenders which have been traditionally conservative in some countries, like Germany or Poland, maybe even more so immediately after Covid-19. On the upside, we could be living with another 3-5 years of ultra low interest rates, which will ease the borrowing situation.

In the UK, several years’ of price stagnation after the Brexit referendum in 2016 may cushion the housing market in the UK and prices. What’s more there is still an imbalance of supply and demand in the UK.

The key is to plan ahead, understand and prepare for these eventualities as an investor.

Source: Mainly FT

If you would like help with planning ahead, understanding and preparing for these eventualities as an investor then please get in contact.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: Covid-19, expat investors

How Covid-proof is the UK property market?

Only a few months ago we sighed a sense of relief that we had a majority in government and that we could move forwards politically and economically… and then Coronavirus hits the streets.…

The lockdowns across the globe are creating an interim ‘normal’ as property investing, for many, takes a back seat. However, there are still some of you checking property investments out from the comfort of your homes but have many questions like:

How ‘safe’ is it now to invest in the UK property market?
What am I best doing now?
What will happen with property prices?
Can I still get a mortgage?
How will the market look post COVID-19?

How ‘safe’ is it now to invest in UK property?

The UK has long had a supply: demand imbalance and the building industry has been trying to keep up with the annual supply of houses, but has never quite managed to meet target numbers. That remains the case and is now exacerbated by vendors not being able to come to market, or at least not as easily in the past. Estate agents have stopped physical viewings, surveyors have halted site visits and many conveyancers are not rising to the challenge of digital and remote working.

All of this means that supply is constrained, but core demand is still there. UK residential stock is a defensive sector, with vanilla buy-to-lets the cornerstone.

The commercial sectors (retail, office, industrial) will, in all likelihood, suffer greater impact as commerce takes a hit during the lock down period. Although Permitted Development Rights developments will potentially get a boost as more high streets lose retailers.

Sectors such as Serviced Accommodation (short lets), Holiday Lets and some HMOs are finding the times challenging as everyone migrates back to their longer term residences. These sectors will, no doubt recover, but it might take time.

The biggest risk currently is delays in new schemes coming to market, with different parts of the supply chain getting back up to speed after the crisis. Possibly impacting bigger developments more, if there are volume supply issues with materials like bricks.

The key is to plan ahead, understand and prepare for these eventualities as an investor.

What am I best doing property-wise now?

Choose the property sector that best suits your strategy, given any risks mentioned earlier. Don’t over-stretch yourself financially over the next 6-9 months and take sensible risks.

Projects nearer completion may be ‘safer’ for investors, given the inherent delays there are going to be in the supply chain for new projects and developments. There may well be some keen prices on early-stage off-plan and new builds, as developers seek to bring cash flow into their businesses, but the risk needs to be evaluated alongside your own financial position and appetite for risk.

What will happen with property prices?

Whilst transactions have fallen away as viewings are not happening, it is less certain property prices may tumble given the level of demand for property is still present.

Many valuers have a 3-month Covid-19 Clause which indemnifies them for their valuations, so we will tend to see normal property valuations continue in the short term. But after 3 months, there will be no historic, robust, 3 month comparables. We might then see valuations being written down to cover surveyors who will be thinking about their Professional Indemnity Insurance, but demand will still be there. There are more likely to be delays bringing residential property to market than significant down valuations.

Can I still get a mortgage?

Some lenders are reducing loan-to-values (LTVs) and increasing rates, not all lenders though. Banks still want to lend. Property offers security versus many other forms of lending with little or no security.

It might be useful to consider the banks financial position, given the stronger lenders with a solid financial backing are more likely to persist with a decent flow of lending and less likely to tighten their risk-management.

How will the market look post COVID-19?

Comparisons have been drawn with the Credit crunch of 2008. During the credit crisis, the FTSE declined 43% from peak to trough. UK property prices declined 19% from a peak in Sept 2007 to a trough in March 2009 (Land Registry).

The 2007-09 credit crisis involved different dynamics, given it was financial, with an almost-complete collapse in the banking system. Millions of people lost their jobs, their homes, their savings or their businesses as credit dried up. While the economic disruption now is immense, the long-term effects on the economy are likely to be far less severe given the speed of government intervention.

UK government stimulus now is more than ten fold the stimulus package in 2008. This gives rise to the view that the bounce back will be quicker than post 2008.

If developers survive the shut down, it could take 3 times the length of the shut-down to recover. Some contractors and consultants may not survive even if developers do, which will create delays as developers seek to replace key members of their build team.

On the upside, we could be living with another 3-5 years of ultra low interest rates, which will ease the borrowing situation and enhance leveraged-investor returns.

If you would like help with planning ahead, understanding and preparing for these eventualities as an investor then please get in contact.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Property Venture® is an award-winning, European investment property specialist and sits on the Advisory Board of the Association of International Property Professionals (AIPP) the business has been vetted, approved and voluntarily commits to Industry Regulation and the Professional Code of Conduct. We are known for our quality customer service and non-pressurised approach to sales. Take a look at what our clients say

Sources: Inspired by ‘Trusted Land’ Webinar, Invest-like-a-Pro, CER

Tags: Commercial, Covid-19, Residential, UK

What next for property investors in UK and Europe?

Well we are all expecting that not much will change in the UK during the ‘Transition Period’ in 2020, or at least have been told as much.

Given the UK is outside the Schengen Zone – which provides for unchecked border crossings in a common-visa area – border checks for holiday-makers and business travelers have been the norm travelling to and from the UK during membership of the European Union. There is anecdotal evidence that some Continental European countries are tightening up border checks, where previously they may have been more relaxed. For example some border mountain passes between France and Italy have been reported to be tightening up on identity checks for ski instructors who have, until now, traveled back and forth freely on a daily basis.

Houses of Parliament: London UK Property market

Thinking beyond the ‘Transition Period’, the renewed gusto with which the UK government is brandishing the potential ‘Hard Brexit’ mantle has been unsettling and it is hard to unpick the political rhetoric and negotiation posturing from the reality.

For expat and entrepreneur UK property investors some of the things you will want to know are:

Am I still going to see my investment property perform?
How might mortgages be affected?
How will the economy and job creation fare?
How much red tape will be stripped away or created when investing for European-based expats?
How might my portfolio in UK and Continental Europe be affected?
What will be the changes, if any, travelling to and from the UK?

So just to focus on a few of these..

Am I still going to see my investment property perform?

Your property’s investment performance, whether a buy-to-let or HMO or Serviced Accommodation, that potentially serves an international tenant base, depends a lot on attracting the right type of tenants and minimising voids. Arguably many of the Europeans who intended to leave, may already have done so and the situation may not get that much worse. In 2018 it was estimated 3.35 million people with EU, EEA, or Swiss nationality were living in the UK. Of these 2.8m people had applied for Settled Status, about 80% of the total number. If the relationship between the UK and Europe worsens significantly this could be exacerbated in the short term. However the UK will remain an attractive place to be for non-European nationals.

Raising finance – mortgages how will they be affected?

The City and financial markets could be hit by the renewed talk of a ‘Hard Brexit’. The stance has been that the city wants to continue trading with the EU as now, meaning equivalence rules across fund management and investment banking. Divergence could have an impact on savings and pensions. There might be a sweet spot where some divergence could work and could be acceptable to EU regulators, which could make a difference to British savers and mortgage borrowers. There is now more talk of ‘outcomes-based equivalence’ meaning third-country regimes do not need to be identical but must have the same “outcomes” as EU rules to give access to its markets.

How this might affect mortgages at this point in time is difficult to assess, but affordability tests could be affected.

In the short term we might notice some subtle differences when travelling, but it might not be until the end of 2020 we get to see what is political-posturing versus economic reality.

As for the economy and red tape it might be too early to tell. However it does feel as though the UK is far more engaged since the December 2019 General Election in pro-actively shaping its future.

If you would like to discuss your situation or find out more then please get in contact.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: BREXIT, European Union, Expats, UK investment

If Santa were a savvy property investor what might he do?

Father Christmas would do well to think about this with a clear head and before drinking any sherry. Why?

Because he would need to have clarity of purpose

He would need to give careful consideration to where in the world he might invest. If in the UK he might think about maximising his income from an investment and might consider putting his money into higher yielding HMOs (Houses of Multiple Occupation) or Serviced Accommodation. But, with that comes higher levels of involvement on his part. Given his sporadic appearances across the country, at odd times of day, he might not have the commitment or consistent levels of time and effort needed to manage these more labour-intensive types of property investments. Of course, he could find a managing agent to act on his behalf, but he would still need a certain level of ‘presence’ to keep on top of them and make sure they are representing his interests properly.

Something like a Managed Leaseback home might suit his ambitions and lifestyle well. It offers a bit of income from when it is let out, but he could still make personal use of it for when he is off-duty. Even better if it is somewhere hot like the South of France, or in a ski resort so he could take a break immediately after Christmas. Mind you he might be a bit fed up with snow by that stage, who knows?

Reality of investment timeframe

Father Christmas would also need to be realistic about how much time it will take to buy a property, particularly if he needs to apply for a mortgage. The buying process is likely to take longer, especially if dealing with a local foreign bank for a mortgage. He really doesn’t want to be forking out for expenses upfront, if he is not fully geared-up to buy.

He also needs a reality-check on what time he can dedicate to building a property portfolio alongside his busy job and tight schedule. If he wants to forge ahead nevertheless, he might need some help and support in finding and buying the right properties for him and his ambitions.

Value: a property with innate value or just simply cheap?

Some investors think they have got a great deal if they have bought cheaply. But this isn’t always the case. For example if it does not have the correct planning or build permits or licences, its value can be severely diminished or unsaleable or illegal. Or if the property is in a poor location with a scarcity of amenities, or transportation links, then it might not represent great value. Father Christmas will want to have some ‘value’ when he comes to sell, or pass it, on.

Exit: does Santa have an end game plan?

It always helps to know what might be the situation in 5, or 20 years’ time. For Father Christmas – who is getting on a bit now – he might need to consider how he passes his property on in a tax-efficient manner. Inheritance rules differ quite a bit from the UK to Continental countries like Spain or France, where descendants tend to have more rights to parental assets than is automatically the case in the UK.

I work with time-strapped entrepreneurs – like Father Christmas – and expats who don’t have the time, local presence or have gaps in their know-how to build property portfolios in the right way for them. This means you can carry on your day-to-day lives without spending disproportionate time getting sucked into investing.

If you would like to discuss your situation or find out more then please get in contact.
Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: portfolio, Top Tips, UK

Property Investor Brexit Strategies

During these times of prolonged uncertainty, businesses are spending money on contingency planning and in some instances stockpiling.

What about individual investors?

Some of them are stockpiling money and playing a wait-and-see game with investments.

Consequences of this investment strategy?

Well money can sit in banks, earning a low interest rate. Whilst inflation is currently contained at under 2%, many savings rates of return do not exceed this, or marginally so, particularly for higher rate tax payers.

But if you would like to shake off the early ‘hibernation’ and do something with some of your money, or dip your toe in the market then there are options out there.

Think about this

There are other investors out there who are making the most of this uncertainty and investing in keenly-priced stock. And for overseas investors or expats buying in the UK then the GBP Sterling exchange rate is very favourable currently.

And then there is the Property Cycle

Whether you are an advocate of the cyclical nature of property or not, there has tended to be a bounce back in prices after a period of sluggish house prices in some areas. Whether you think of it as a 10 year or 18 year cycle.

The Brexit-effect depends on the nature of your investments. Whilst we are in unchartered territory, as an investor it could be an optimum time to invest in new properties and spend time refurbishing or developing them. If an upturn is due you could be paving the way to profit once the next phase of the cycle hits.

Either way it makes sense to build in more exit options and greater levels of padding to your financial contingencies, so you are financially prepared to hold that property until the time is right.

An alternative way of investing

Some landlords and property investors are seeking ways of continuing their property businesses in a way that will give some reprieve from the landlord red tape and tax in the UK. It is a way of diversifying and getting exposure to a number of different investment categories; either different geographies, or different types of property, for example commercial vs residential property.

Alternative investing can include Crowdfunding or lending to developers.

So consider a developer who has end user ‘blue chip’ clients lined up, who knows what the end-user demand is before embarking on developments, one who works with big companies like McDonald’s and Starbucks. They also have Build-to-Rent as part of their offering, working with local authorities and sometimes pension funds, to build to demand. They have also bolstered their resources to navigate better the increasingly challenging planning approval process. And have a cross-functional board which evaluates rigorously development opportunities.

Getting exposure to this type of developer, can be done in a measured way, in bite sized chunks. Some investments start at £5,000 or £10,000, some lower, particularly if part of an IFISA (Innovative Finance Isas), where entry levels can be £1,000. Investing via an IFISA, can be tax-efficient, when used as part of a personal Isa allowance, so returns can be tax free for UK residents.

What are the upsides of alternative investing?

The returns on offer can be inflation-busting and much higher than other forms of investing. They are not always correlated with economic returns, so helps spread risk during different economic cycles. They also usually offer defined timeframes (although there are no guarantees) so this can help with planning.

It is important to note that alternative investing provides an alternative way for entrepreneur investors to get exposure to all that property can offer, but none of these ways of investing are guaranteed. Capital is at risk and returns are projected, not guaranteed. This is why many of these types of investments, whilst being accessible tend to be only available to individuals with a certain asset base or income, or who aren’t investing too much of their money in any one of these investment types.

If you would like to discuss your situation or find out more then please get in contact.

I work with time-strapped Expats and Entrepreneurs who don’t have the time, local presence or have gaps in their know-how to build property portfolios in the right way for them. (Or who are simply stuck with little progress).

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: Alternative investing, BREXIT, investor stragtegies, UK investment