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Making (A Living From) A Home In A New Country: UK Investment

Provided by Select Property
10 February, 2015


Buying a home in the UK shouldn’t be an activity reserved solely for Russian oligarchs. Sure, property prices in Belgravia, Knightsbridge and other prime London locations are some of the highest in the world, and you may need an oil company or two just to purchase any home slightly bigger than a shoebox, but more and more expats are looking at the UK property market.

It’s not about putting down roots, settling down in a suburban family home or even getting on the property ladder, for most expats the UK represents the chance to own a high-performing asset, a reassuring purchase in an increasingly turbulent world.


Global uncertainty

The latter half of 2014 saw a dramatic fall in oil prices. The price of a barrel of oil has plummeted from $115 in June and at the turn of the year was languishing below $50.

This single macroeconomic trend has caused havoc with exchange rates and equities and left the investment community scratching its collective head over what to do next.

The problem is oil prices are only one ingredient in 2015’s volatile mix. The prospect of a complete Eurozone breakdown remains unlikely, but a Syriza win in the recent Greek election has made it more of a probability, while the chances of the Fed increasing interest rates this year are far higher. The Chinese economy continues to lose pace and even the UAE property market is in for a year of reassessment.

In short, investment options are more limited this year.


An Englishman’s home is his castle

So, why the UK? After all, the country has a general election this May and is the subject of its own political uncertainty.

Unlike other property markets in the world the UK’s is intertwined with economic performance. There’s always a feeling of wealth creation as long as house prices are maintained. Whoever wins at Westminster there will be an unspoken mandate to keep the property market on its current upward trajectory.

Last year, Knight Frank found the UK to be the fifth highest performing property market in the world, with only the likes of Dubai offering investors more. However, unlike Dubai the UK’s housing market has stood the test of time, it has a proven history of long-term returns.

Research conducted by Paragon Mortgages shows that over the past 18 years property has cast a long shadow over other asset classes available to expats. Every £1,000 invested in the final quarter of 1996 would be worth £13,048 by the final quarter of 2013 – a compound annual return of 16.3%. Shares averaged 6.8%, gilts averaged 6.5%, while cash languishing in your bank account offered a lowly return of just 4.0%.


Growing demand

Buy-to-let investment property is key. It’s one of the few assets capable of offering high capital growth and regular income.

The UK’s private rented sector is four million dwellings strong and is growing. Office for National Statistics figures show the UK’s population has increased by approximately five million since 2001, easily outpacing the supply of new homes and resulting in a structural undersupply of accommodation across the country – hence the constant price growth and a steady supply of new tenants.

However, there is also a growing preference for rented accommodation – especially in city centres.  Knight Frank believes increased labour mobility has led to a rise in demand for rental accommodation among workers looking specifically for flexibility of tenure – especially in urban centres, while 50% of all households in the rented accommodation are classified as high income.

So, there’s a history of long-term returns and a new growing market.


But I’m an expat and I don’t know anything about UK property?

One of the big reasons people shy away from property as an investment is the amount of commitment it requires. For expats these problems feel as though they are compounded. You don’t know the supply and demand of the market, you may have no idea how to tenant it, you are not even in the country to see your property.

If you’re still thinking like this then you’re not thinking as an investor. As mentioned the UK housing market is big business, with reams of property research conducted on its various nuances. For instance at the start of last year Nationwide building society told you the best performing regional towns in the country in terms of capital growth:

Rank

Town/city

Annual change

Average price

1

Manchester

21%

£209,627

2

London

13%

£385,741

3

Brighton

12%

£348,918

4

Leicester

11%

£168,778

5

Birmingham

10%

£151,793


While Hometrack has recently published a report that shows Sheffield, Manchester, Liverpool, and Newcastle will all offer opportunities for further growth over the next year.


Safe as student houses

You don’t even need to get involved in the management of the property. Investors from all over the world have ploughed £6 billion into the UK’s student accommodation market over the past three years. It’s seen as the safest of property investment options.

As you’ll know, the UK’s universities are some of the most prestigious in the world. They attract a constant influx of international and domestic students who all need somewhere to live. This piles further pressure on the existing undersupply of housing in university cities. Location such as Newcastle have one dedicated bed for every six students.

However, what makes student property such an attractive investment for expats is not the logical supply and demand scenarios, nor the higher than average yields. It is the effortless nature of the investment. The expat pays for the property, they own the property, they receive a return from the property and can sell the property when they like. The expat doesn’t need to maintain, manage or let the property – all that is taken care of by the dedicated management team.


Expats and UK housing

Making a home in another country has never been an issue for expats. Making a living from a home in another country is equally as appealing in this year of uncertainty.




 

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