Well by this I don’t mean tiny dwarf-like properties, I mean ones that meet 4 core PIXI acronym criteria.
Profitability – of the sector
This relates to the area you are investing in, as well as the individual property you are acquiring. So consider what is the supply demand balance like in this particular sector? Housing supply, which is affected by a myriad of factors ranging from; ease of planning consent, general levels of bureaucracy, existing housing stock, to the cost of building. Whereas property demand dynamics are influenced by the proportion of buyers to renters, through to the rate of investment returns in other asset categories when compared with property. So in a low inflation, low interest rate climate, property is seen as an attractive way to make money in comparison if it can deliver yields of 5-15%, with capital growth on top.
A liberated property market, which has an open-door policy to foreigners and locals alike, encourages investment in local property. Ease of buying, as well as letting, also make a market more attractive. It’s all very well having a dynamic city, but if red tape and bureaucracy make it difficult to buy, then the property market becomes very illiquid.
There are sectors which have big headline yields, but yet are becoming increasingly regulated and take a lot of effort to make it work well. Here I am thinking of HMOs (Houses in Multiple Occupation) in the UK as one example, which are facing increasing regulation and red tape. To my mind they also require a hands-on approach to make them work well. Whilst buy-to-let properties have attracted more taxation in recent years’ it is still possible to own as a low hassle investment option.
Infrastructure improvements or regeneration
Act as a driver of demand in the locality. New facilities such as roads, high-speed railways, the addition of significant leisure facilities, or new special economic zones that attract multi-national businesses, are all good for the local property market.
A property’s location within a city, its proximity to road and rail networks and the quality of schools and major employers are important. So you might want to consider there is usually a price premium attached to a property within 5-10 minutes of a tube station. Or if you are thinking longer term you might consider that suburbs, or buying near trunk roads are a better bet, as technology evolves and develops. So electric cars will reduce pollution on current busy trunk roads and the physical movement of people to a city centre may become less of a priority.
In the UK key infrastructure projects which will act as property price drivers are HS2 (benefiting the likes of Birmingham, Manchester, Leeds), the Elizabeth Line/ Cross Rail (boosting Royal Docks in East London and Essex through to Reading in the West).
X-factor, or something special happening
Which can give a fillip to the market. So it could be hosting the Olympic or Commonwealth Games, which can provide a short term boost as well as a lasting legacy of infrastructure improvements. Or it could be the creation of a special economic zone or Hi Tech hub which creates other spin-off businesses.
Inward investment by businesses
Improving the area and its micro- economy. When international businesses invest locally, or local businesses grow, they attract workers to the area, seeking homes. Their success brings affluence, creating not only potential home buyers for when an investor comes to sell (part of the exit strategy) but also increases demand, which in turn drives up property prices.
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Louise Reynolds, Director of award-winning, European property investment firm Property Venture® who helps busy business people enrich their lives through property. The focus is mainly: Buy-to-let homes in the UK, Poland and German investment property, Managed Leaseback in France and Spanish city property.
On the Advisory Board and a Member 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
Tags: Buy to let, HS2, investment property, Risk & Reward, UK