How on earth do you make sense of the market currently….? The UK property investing climate is causing panic. We’ve experienced material shortages and regular, almost weekly, price increases. Then the energy crisis fuelled inflation. Followed by the UK government announcing swingeing, unfunded, tax cuts that sent the financial markets into a tail spin, increasing the cost of borrowing even further.
Starting your UK property investing journey?
If you are just embarking on a refurbishment or development, then stress-testing at much higher finance rates around 6% might be sensible. And working through various financial and exit scenarios.
Midway in a UK property refurbishment project?
If you are part way through a refurbishment project that’s more tricky. It may be a question of being more flexible than ever before.
Can you:
· borrow less and keep your LTV lower, thereby reducing your debt level?
· Consider a number of different sources of finance, or a blend of finance, thereby spreading the risk?
I don’t think panicking is helpful and rushing into locking into inappropriate products. Evidently you might be rushing to get a low rate locked in, that is different. Seize the moment. The market is in a state of flux, but interest rates may settle as lenders calm their nerves and can see a clearer picture emerging.
Managing UK property investing risk
This is a time to mitigate risk and take the medium to long term perspective. We may no longer live in the ultra-low interest rate era and may have to readjust to ongoing higher Bank of England interest rates. Perhaps at the 3% mark and the commensurately higher mortgage rates.
At times like these we might need to consider the total lifetime return on property investments, Return on Capital Invested (ROCI) over a period of time, not just yield or cash flow but capital growth as well.
This might include future-proofing your property as well. For example making it more energy-efficient, so that if the rental rules change your asset is more valuable as it already complies with newer more stringent Energy Performance criteria.
UK Property Investing – Market Context
There is still a supply: demand imbalance in the UK property market which isn’t going away anytime soon. So there are market fundamentals that still make UK property investing attractive.
How are you making sense of things and what measures are you taking?
I help busy UK-based professionals and expats navigate the property market challenges. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients. If you want help on your property investment journey then get in contact +44 (0) 1932 849 536 or e-mail info@property-venture.com
Tags: Buy to let, developing, investment property, mortgages, risk