The UK is one of the most popular markets for property investment in the world and continues to provide great opportunities to generate long-term returns. Despite the recent economic uncertainty, a recent survey by Finbri has revealed that 50% of property investors, and 68% of experienced investors with over five investment properties, are still planning to expand their portfolios in 2023[1].
Whether you are new to the UK market or an existing property investor here, what steps do you need to consider to make 2023 a successful year for your property investments?
Establish your goals
The first step on your property investment journey should be to define what success looks like. If you plan to invest in property to supplement your retirement income, then your main priority might be to generate a regular monthly return. If you want to use property as a way to store existing wealth and protect it against economic instability, long-term capital growth might be your priority.
Whilst ideally all investments would deliver excellent returns and market-leading capital growth, the reality means you might need to compromise, so it’s key to set goals that are relevant to you. Speak with an investment specialist to work through these vital strategic questions before making any big commitments.
Choose the right location
There are no ‘right’ or ‘wrong’ locations for property investment. What’s ‘right’ will depend on your investment priorities, budget, target market and risk appetite. For mainstream investors interested in assured shorthold tenancy agreements (AST), indicators of a promising market might include proven rental demand, a growing population, increasing employment and continued inward investment.
For investors targeting conventional ASTs, university cities can offer some of the best options. These don’t need to be the largest and best-known cities like London, Manchester or Birmingham. Better results can often be achieved in smaller cities where demand is strong, supply is limited and where average prices have remained affordable.
However, not all investors are interested in mainstream properties. Instead, you may be looking specifically at properties such as holiday homes, which have been increasingly popular since the emergence of the UK staycation trend. This year, Sykes Holiday Cottages published its annual Staycation Index revealing that a rising number (77%) of Britons intended to holiday in the UK. Looking ahead, the company’s research also suggests that UK visitor interest is growing in Somerset, Norfolk, Suffolk, Argyll & Bute and Dumfries & Galloway. As flexible and hybrid working has become the norm for many businesses, this also enables more people to work wherever they want, extending their holidays.
Choosing the right property
When it comes to choosing the right property, there are also numerous subsets of residential property to consider. These can range from conventional homes to purpose-built apartments that boast attractive extras such as gyms, cinemas and concierge services. But how do you choose the right property?
It’s important to consider market trends. For example, ONS Census data has revealed that the number of over 65-year-olds has increased by two million people since 2011. This could increase demand for retirement properties, as well as smaller flats and bungalows in the coming years.
Another key trend to watch is energy efficiency. Given the rapidly rising cost of energy, prospective tenants are quite rightly moving energy efficiency up their priority list. Proposed legislation may soon require landlords to adhere to a minimum Energy Performance Certificate (EPC) rating of C or above on new lets, and all rental properties by 2028. For this reason, it’s worth considering sustainable properties such as new builds or new office-to-residential conversions, as these are generally built to modern energy efficiency standards.
As we head into the New Year, this is a great opportunity for you to speak with an experienced financial adviser or investment specialist and work through these vital strategic questions to understand which types of property investment are best for your property investing plans and goals.
By Andrew Ward, Managing Director at Solomon Investment Partners
For further investing tips, read the Solomon Investment Partners guide ‘How to Future-Proof Your investment Strategy’.
[1] https://www.finbri.co.uk/blog/base-rate-property-investment-survey-2022