UK property is one of the most popular investment assets in the world. Over the last 20 years, property prices have continued to rise, despite periods of financial uncertainty, offering investors a reliable return.
With the rise of “generation rent”, the number of potential tenants is increasing all the time. Approximately 18.7% of the UK’s housing stock is currently privately rented, which is up significantly from the 10% figure 20 years ago. The UK is now home to property hotspots like Greater London, Manchester or Birmingham that combine the benefits of steady capital appreciation and strong rental demand.
Why invest in UK property?
What is property investment?
Property investment is the purchase of real estate with the intention of earning returns from it; either through rental income, capital appreciation and resale further down the line, or both. Essentially, it’s the purchase of property not for residence, but investment returns.
As such, property investment involves different considerations for the investor, compared to the traditional homebuyer. As a property investor, you’re looking to find a unit or development that will give you the best return on your investment over a timescale that suits you.
Property investment comes in different guises. Classic buy-to-let, student property investment, HMO or block deals and fractional ownership. Which one is right for you will depend on your budget, timescale and overall objectives.
At Hoxton Property, we’re skilled at working with our investors to recommend the best approach to suit you.
Find out more about how to build your property portfolio.
How do you make money from property investment?
Property investment makes money in two ways – capital appreciation and rental income.
Capital appreciation is the fact that your investment property increases in value over the years that you own it. In the UK, houses prices have been increasing steadily over the last 40 years. The current average house price in the UK is around £268k, which is up 10.2% yr-on-yr.
Capital appreciation is caused by a number of factors.
An imbalance between supply and demand means that property is a desirable commodity that buyers are willing to pay more and more to acquire.
Additionally, as new cities grow and develop, the desirability of homes in that location grows and residents are prepared to pay more to live there.
Some investors will also increase the value of their asset by improving the asset itself. This could be through refurbishment, expansion or change of use.
Rental income is money the investor makes through charging tenants to occupy the property. This monthly rent can go up due to inflation or increased demand for the particular location. Most buy-to-let investment relies on residential tenancy to deliver rental income.
Why invest in property?
Property investment is one of the most popular forms of investment in the UK. For years, investors have been attracted to the dual benefits of capital growth and passive income that property offers. When compared to other investments, property has many advantages.
As a property investor, capital growth and rental income give you two ways to make money. You don’t have to do anything and your investments pays you returns. This is why we refer to it as “passive income”.
You can use your new income to fund retirement, build more investment potential or simply afford a more comfortable lifestyle.
Additionally, unlike stocks and shares, property rewards investors with a tangible physical asset – the property itself.
Property investment can be as hands-on or hands-off as you want. At Hoxton Property, we specialise in turnkey properties to offer an easy option. We source a range of properties to suit our clients’ needs and can handle mortgages, finding tenants and on-going property management for you.
Is property a good investment?
Investment in UK property has a proved predictable and stable over more than 40 years.
As an island, the UK is limited by land which means there’s a finite number of existing houses and a finite potential to build more houses.
There is also a growing population who will always need somewhere to live. These two forces mean that property is always in demand.
The UK currently suffers form a lack of housing and it’s unlikely that this is going to be addressed soon. Whilst this continues, coupled with the growing population, we can be fairly certain that property will always be valued.
Not everyone can afford to buy a property outright. And many of the new “generation rent” don’t even want to. This means, in the right area, property investors will always find a ready supply of tenants looking to take advantage of rental property.
Find out more about why now is a great time to invest in UK property.
How much money do I need to invest in property?
“How much money do I need to have to start investing in UK property?” It’s a question we’re often asked when we first speak with a potential Hoxton Property client.
Find out more about how to fund your first property investment.
As a rough estimate, you’ll probably need at least £35,000 to start investing, provided you can borrow to a good level. To give a more detailed answer, we encourage you to consider a few additional factors.
Perhaps you’re looking to add to an existing property portfolio to grow steady passive income? Maybe you’re looking for a big first investment to set you up for retirement? Or you want a property for your child to live in when they go to university which you’ll keep in the family when their studies have finished? By having a clear idea of what you need, we at Hoxton Property can recommend what capital you need to move ahead with property investment.
If you currently own property, you may be able to use equity release to boost your initial investment capital.
We encourage our clients to keep an open mind about the location of their investment property. Property prices fluctuate significantly across the UK, meaning your money will go further in some cities compared to London, for example. Read more about where to invest in property in the UK.
How much you can borrow will have a huge impact on the initial amount of capital you need to provide to start investing. With interest rates still relatively low in the UK, our mortgage team can help find the right deal for you to maximise the value of the property you purchase. Using borrowing to fund your property purchase helps you afford a property that is above your cash budget, but still remains profitable even when including the mortgage payment.
If you have a relatively low amount of initial capital, it can sometimes be better to wait a few months until you’ve built up a larger amount. When coupled with borrowing, a £10,000 increase in initial capital could make the difference between being able to afford a £120,000 property or a £200,000 property.
What returns could I see from property investment?
It’s difficult to generalise the returns you’ll see from property investment as the yield is influenced by several considerations.
Rest assured, at Hoxton Property we’ll work with you to find the best returns for your situation. All our recommendations are individually tailored. And, because we’re agents rather than developers, we have a wide range of developments to suit all scenarios.
Real estate investment makes money in two ways – rental income and capital growth. Our experienced consultants at Hoxton Property know the UK property market inside out and can help predict your likely returns over a 10 year period.
Thanks to our experience, we can estimate the rental income you’ll generate based on historical figures for similar properties and forecasts for likely growth.
This is combined with forecasts for house price growth in the area to suggest a potential return on capital should you sell the property in the future.
These figures are then offset against the ongoing costs associated with property investment. These could include mortgage repayments, service charges, property maintenance and various taxes.
Where is the best place in the UK to invest in property?
The UK property market is full of regional variations. Because of this, it’s difficult to pinpoint the UK’s best city for property investment. However, there are common factors between the highest yielding towns and cities across the country. These factors tend to work together to help fuel property booms. Find out more about where to invest in property.
Look for cities that are experiencing population growth. This is normally a sign that other factors are moving in the right direction, making the chosen location a desirable place to live and work.
Tenants will only move to a location if there is enough employment available to make the town or city a viable place to live. Often, job creation follows on from population growth as services are required to cater to the growing number of residents.
If you’re looking for capital growth over a long period, you should try to find areas where the demand for housing is higher than the available housing.
This can come from private sources, the government or a mixture of the two. The key here is that investment is incoming and being used to create public services, transport infrastructure or the private enterprises that make a city more liveable for the incoming tenants.
Emerging places to invest in the UK
How can using a limited company help me with property investing?
Purchasing property through a private limited company can help investors take advantage of tax efficiencies.
What’s more, it’s a good way to limit your personal liability, separating your personal assets like your home, from your investment assets.
We work with trusted partners to help our clients set up their own private limited UK companies. You won’t have to deal with the paperwork or admin required but can benefit from the unique advantages it gives you.
Find out more about how using a limited company can help you invest in property.