The UK property market has been making headline news in recent months, as a period of rapid market value growth – facilitated by a number of disparate factors – gave way to significant falls in value. Rising mortgage rates and an ongoing affordability crisis for many first-time buyers have changed the property landscape again, creating a short-term picture of volatility.
But, volatile as the market may be at present, short-term falls in value do not change a fundamental truth about the property. Property is one of the safest long-term investments an individual can make, being a crucial resource that enjoys unilateral demand.
Even though short-term shocks, the property remains a smart option for longer-term investment, offering growth opportunities above and beyond those offered by conventional banking. Still, property investment can be a complex thing; what do you need to know before you make steps towards a property investment portfolio?
Choosing the Property
Though investing in property for financial reasons is an entirely different endeavour to choosing a new home, both undertakings are still beholden to the same core principles. Property values are dictated by a number of key variables, which you will have to take into careful consideration when looking for the best growth vehicle.
For example, location plays a central role in the long-term viability of your property investment. London is a property hotbed, but not a strong long-term consideration at present; property values have stagnated, and legislative action to ease its housing crisis could negatively impact demand for investors. Meanwhile, new developments in growing Northern centres such as Leeds and Newcastle present the biggest potential for return on investment – more on which later.
Building a property portfolio brings along with it some necessary legal considerations, which can differ depending on your situation and intentions. For example, letting property out will require you to become familiar with rental legislation and tenant’s rights, while simple property ownership will require you to review your tax obligations.
There is also something of an elephant in the room, with regard to your personal situation as an investor. Personal issues can impact financial security, particularly where a partner may not have your best interests at heart. Financial abuse is a silent killer of financial prospects, and property can be used as an instrument; consultation with professionals can help you understand your rights and entitlements whether or not this applies to you, for future reference.
Return on Investment (ROI)
There are multiple ways in which your property can generate money for you. As a passive investment, returns are generated through market value inflation; choosing a property in a developing area enables you to benefit from the upswing in values, dramatically improving ROI.
As a more active form of investment, property can generate value in the form of rent. Commercial premises command high rent prices in built-up areas, creating a high ceiling for returns depending on the longevity of the business you let to. Domestic lets are a sustainable route to semi-passive income, and can also be used to reduce debt burdens where mortgaging was necessary.