City Mortgage Solutions have kindly invited me to share some of my experience in property investment.
Through my own holdings, and insights gained in positions across the industry, I hope to offer some guidance and will attempt to demystify the investment property market.
Firstly, WHY PROPERTY INVESTMENT?
In recent years property has proven an increasingly attractive asset class for investors. I speak with clients on a daily basis and the following are the most commonly cited sentiments:
- People want to subsidise their income or plan for retirement. Property offers the potential of dual gains through the combination of capital appreciation and rental income
- The low interest rate environment has forced savers to seek stronger returns, and buy-to-let yields of upwards of 5% are compelling.
- Property allows investors to ‘leverage‘ (fund part of the investment through lending) via mortgage finance, something largely inaccessible for those investing in stocks/shares.
- The tangibility and relative simplicity of property investment are appealing in a time of increased financial market complexity and volatility.
- House prices and rents have been rising rapidly, so naturally investors are drawn.
Fundamentally the clients are seeking decent and stable returns. The UK property market is able to offer this as a symptom of its systemic failings. What do I mean by this? Well, through a combination of planning restrictions, post recession constriction of construction finance, and rapidly rising population- we simply do not produce enough homes and demand for them is increasing. Under these market conditions prices will rise.
On the rental side there has been an attitudinal shift away from property ownership that has lead to a rapid expansion of the Private Rented Sector. Demand for rental properties is outstripping supply, especially in city centres, and rents are consequently rising.
However, this is NOT simply a case of ‘A rising tide lifts all boats’. There are smart ways to invest in property and there are pitfalls to avoid.
In the forthcoming posts I will delve into the specifics of what I consider to be the essentials:
Investing for capital growth
Finding trusted partners,
My thoughts on future trends
Samuel J Richards
Note: Comments & thoughts are my own and not the views of City Mortgage Solutions Ltd