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.

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

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

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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

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

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Pension power or pitfall? What role property?

This year has marked a new era in pension freedoms. Those 55 or over are meant to be able to freely access their pension pots (defined contribution, not final salary ones). This will empower some, or could create a whole new set of dangers. Why is that?

Continue reading Pension power or pitfall? What role property?

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