With economic contraction and high deposits, the UK may not look like a traditional property investment hotspot at the moment. However, buyers shouldn't be fooled by this seemingly bleak outlook. In fact, for the savvy investor, now may actually be the time to put money into British real estate, be it residential or commercial.
Of course, caution is always advised and you need to do your research, but in the right sector and with the right deal, there is no reason why bricks and mortar can't be a viable asset for investment.
Here are five reasons why now is the ideal time to invest in UK residential and commercial property.
Confidence is increasing
Confidence in UK property is on the rise and investors are starting to notice that the market is becoming ripe for investment. So promising is the outlook that the Royal Institute of Chartered Surveyors (RICS) actually believes that the sector is through the worst. In their latest housing market survey, they reported that the number of housing transactions increased in January, with some 15 per cent of chartered surveyors noting a rise in sales - the fourth in as many months.
Prices have also been relatively stable, remaining in positive territory in London and the South East. Although a further four per cent of respondents noted a price fall in January, values have remained consistent with December 2012.
Peter Bolton King, RICS global residential director, commented: "Price falls across the UK have gradually stemmed in recent months and it is interesting to see that the amount of completed transactions are on the rise, as confidence returns to the marketplace. While it is still very early days to talk about a comprehensive market recovery, activity levels are still encouraging and there is some optimism out there that things could continue to improve."
This rise in sales is no doubt thanks to the pleasing jump in mortgage approvals. According to the latest data from e.surv chartered surveyors, approvals actually hit a four year high in January, standing at 65,184 - a rise of 17 per cent month-on-month and 13 per cent year-on-year. As this is the highest recorded figure since the 2008 financial crisis hit, there is every reason to take heart - there is light at the end of the tunnel after all.
Government championing first time buyers
The past few years have been bleak for first time buyers and owning property has seemed like an unrealistic dream for many. However, last year the government said "no more" and decided action was needed to help people get onto the property ladder.
Enter the Funding for Lending Scheme in August 2012. Under the plan, banks and building societies can borrow from the Bank of England until January 31st 2014 for up to four years against loans. Already bringing about results, the scheme is designed to encourage a culture of lending, offering financial institutions incentives to lower interest rates and increase the availability of loans. After all, the more you lend, the more you can borrow. Homeownership schemes have also been introduced, including First Buy equity loans, shared ownership and New Buy.
Cheap fixed mortgage rates
If you want to get the best fixed mortgage rate, now is certainly the time to strike in the UK. Moneyfacts claims that these mortgages are now at their cheapest level since they were introduced in 1989. This is good news, with 80 per cent of buyers in the UK opting for a fixed rate.
Sylvia Waycot, editor of Moneyfacts, told the Daily Mail: "Fixed rate mortgage rates are dropping like stones. More and more homeowners are benefiting from cheap fixed-rate mortgages as a result of the government's scheme. Rates started a slow descent shortly after the Funding for Lending scheme began last August, and have picked up speed. New 'best ever' deals are coming onto the market almost daily."
Business rate retention scheme
It isn't just the residential market that is benefitting from a change in fortunes and the commercial sector is also faring well. What's more, the government is keen to see this continue and the introduction of the business rate retention scheme is hoped to give the sector a boost.
Beginning in April, the scheme will see councils keeping a proportion of business rate revenue, as well as growth on that revenue. This gives a "strong financial incentive" for councils to promote economic growth and support businesses. It is also expected that the arrangement will see a raft of new planning approvals.
A capital city on the move
It is hard to ignore the fact that London is a city on the move, with investors flocking to the safe haven and property prices rocketing. In January alone, residential values increased by 0.4 per cent for prime property in the capital, with high earners helping to fuel demand.
With supply unable to keep pace with demand at the moment, there also remains plenty of opportunities for developers. However, it is important to be aware that there is currently short supply of residential land in the capital. Knight Frank claims a complicated planning regime is also causing problems and a more streamlined system is needed to release more land.
- Thursday 07 March 2013