News & Insights

UK Property – Still a Good Investment?

Understanding the 2018 rent price drop

According to ‘The Guardian’, data from the Deposit Protection Scheme – a government-backed group that supervises tenancy deposits – confirmed rents fell on average by 1.2% in 2018. The biggest percentage fall was in Yorkshire, where the average rent dropped by 3.6%. According to the Residential Landlords Association, demand from EU nationals had certainly slowed and they are witnessing a shrinking investment in the sector because of the extra taxes being levied on landlords. Demand began to slow down, especially in London, which makes up a considerable proportion of the private rental market in the UK, as more people left the city; all of which had a downward effect on rents.

Is property still a strong investment?

Not only did property investors see their rental income drop in 2018, but house prices in some of Britain’s richest areas also had up to a quarter wiped off their value, according to the estate agent, Your Move.

Meanwhile, 2018 data from Rightmove revealed that the average asking price of a London home fell below £600,000 for the first time since August 2015, and was well below its peak of £650,000 just prior to the Brexit vote in 2016.

To stoke the fire, The Royal Institution of Chartered Surveyors also announced at the time, that house prices were fell at their fastest rate in six years, with sales at their weakest in 20 years. They further suggested that London property prices have been the most affected by Brexit, given the influence of wealthy foreign buyers. Your Move data reveals there had also been big falls in a few key boroughs at the top of the market. The average house price in Kensington and Chelsea, the UK’s most expensive place to buy a home, dropped by more than a fifth YoY in 2018, from £2.25m to £1.77m.

What is a good investment: property or shares?

As we well know, property is an illiquid asset so you should always ensure you have substantial wealth elsewhere as a back-up rather than relying on a property investment. So, what are the alternatives for investors as interest rates remain low, and when is a rental property a good investment?

The benefits of investing in bonds and equity

The two main investment classes we are used to are bonds and equities. Certain UK bond funds yield in the region of 4-4.5%. Bonds offer instant liquidity and whilst the capital value can fluctuate, they offer a lot less volatility that property prices. Investing into an equity fund that holds shares, but is actively managed is therefore a very attractive option as not only will you receive a good level of income but you can also potentially see capital appreciation if the basket of shares increases in value.

When is a rental property a good investment?

While UK property is losing its appeal as an investment opportunity and more liquid, high yielding and less volatile options are available, there are occasionally opportunities to make money. A rental property is a good investment if you can expect a yield of +7%, however, depending on the area or city, a 5-6% yield might offer a worthwhile return. If you’re still unsure as to what is a good investment property, consult your financial advisor.

The content of this article is for information purposes only and does not constitute advice. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

Disclaimer: This communication is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity.

Other News

A state of uncertain uncertainty

A very good friend of mine told me the story that just when you think everything is working well for you, that man with the spade pops out from his hiding place and smacks you right in the face. Now, I’m not talking about what happens in Glasgow when you’re walkifinancial marketsng home from the pub on a Saturday night (and I’m Glaswegian so I’m allowed to joke about things like that); I’m talking about 2016 and what faces each and every one of us this year – uncertainty.  In fact, it could almost be classed as uncertain uncertainty. The key issue for British expats is obviously the UK referendum on 23rd June when the vote will be taken as to whether or not the UK will stay in the European Union.  

Read More

Here today, gone tomorrow?

While the markets are going up and down madly, are you being looked after by your financial adviser? The economy has dominated the headlines since the turn of the year, and many people are concerned about their hard-earned savings and investments. Very often, the best approach is to either wait out for markets to calm down, or take advantage while they are lower.

Although there is a risk in wanting to take action every time big market moves are on the news, it’s still worth asking a few questions regularly: does the reasoning behind your investment strategy still hold true? If so, should you be taking advantage of lower valuations by committing more resources to your long-term finances? If it doesn’t hold true anymore, is it the right time to move out of certain investments and take a different approach with your money?

Read More

Select your country

Please select your country of residence so we can provide you with the most relevant information:

You are currently viewing the Blacktower Financial Management EU website.

You may be looking for the Blacktower United States website.

Blacktower United States > X Stay on this site

Or choose your country.