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Blog > Property Market

Is now the right time to buy UK property?

11 June 2019 • British Pearl

This is one of the key questions that prospective investors often ask us. So the Property and Investments Teams here at British Pearl sat down to discuss and share their thoughts.

Taking a long term view

We believe that due to the large transactional costs incurred in property investment (such as legal fees and stamp duty) a longer term view has to be taken. There is also no rapid entry and exit and therefore property is an asset class that cannot be easily 'traded'.

As a result, British Pearl is very much focused on ensuring longer term capital preservation with growth where possible plus identifying strong rental demand. Of course, there are always risks of a general set-back in headline national property price levels, but we truly believe that this does not mean that opportunities are not always available.

Special offer for new investors: earn up to 5% cashback on first investments. For example if you invest £10,000 you will receive £500 cashback. View offer Capital at risk. Terms and conditions apply.

Reviewing the macroeconomic drivers of the property market

Since the global financial crisis shook the markets in 2008, there has been a fundamental shift in the financial world. Many central banks, including the Bank of England, pushed their interest rates lower in order to stimulate their economies.

This created an environment where interest rates payable on cash became extremely low or non-existent. Many investors are therefore looking at alternative ways to generate long-term capital growth or to boost the regular income that is needed to cover day-to-day living expenses.

Property is one of these alternative investments. It also happens to be an investment that people in this country understand and have historically trusted. The key factors influencing property prices currently are:

  • Supply and demand: the overall size of the housing stock is still expanding very modestly (latest data suggests 217,0001 per year). With overall demand growing at 240,000 to 340,0002, this supply shortage continues to support prices.

  • Economics: Economic uncertainty continues as Brexit outcomes remain unclear. Weakness is likely to be seen, and as a result would normally weigh on the property market. This is likely to slow down transaction levels in the near term. This will continue to impact more speculative markets (such as new-build flats in central London) rather than other markets.

  • Interest rates: While the uncertainty of Brexit remains, there is little chance of any significant upward shift in interest rates. Longer term, with an uncertain economic outlook, interest rates are likely to remain relatively low compared to historical norms.

  • Taxation: Government policy has been to reduce the attractiveness of second properties from a taxation perspective, which has clearly had an impact on buy-to-let landlords. This means there are opportunities for experts to identify attractive options and operate more efficient property management.

  • Mortgage affordability: As a result of the 2008 credit crisis, the Prudential Regulatory Authority now requires mortgage lenders to conduct more stringent affordability checks on borrowers for personal and buy-to-let mortgages, this has lead to a reduction in the number of mortgages available.

Building in capital protection

With the current economic backdrop and the impending uncertainty of Brexit, we understand investor concerns around the risks being faced by asset prices generally and specifically property prices.

We believe that times of risk are some of the most interesting times to be able to identify opportunities since many investors are looking at alternative assets purely as a result of those headline risks. Furthermore, in order to build in as much capital protection as possible we work hard on the following three areas:

  • Buying well with cash in order to negotiate strong discounts to open market values (as reflected in property purchase price versus the individual RICS valuations provided for each property).
  • Carrying out any specific works to maximise the property value. This may be minimal for a new build property, extensive refurbishment for an older property or anywhere in between.
  • Structuring each specific investment in a way that we believe is most appropriate to allow customers to build custom portfolios.

Summary

In short, there are always new market opportunities and we believe that when there are headline risks that are driving headlines nationally and weighing on the confidence of investors then it's a really interesting time to be scouring the marketplace to identify interesting investment opportunities.

Special offer for new investors: earn up to 5% cashback on first investments.For example if you invest £10,000 you will receive £500 cashback.

Capital at risk. Terms and conditions apply.

Sources

1 Housing Statistical Release 24 May 2018

2 House of Commons briefing paper, 12 December 2018

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Your capital is at risk Investing in property involves risk. The value of your investment can go down as well as up and historic performance is not a guide for future performance. Any projections of future performance are based on all information known at the time of share investment or loan, and internal calculations and opinions of British Pearl. These are subject to change and are not guarantees and should not be relied upon as such. Risks include the total loss of your share investment or loan, variable rental income due to property not being rented or a depressed rental market, and inability to sell your share investment or loan due to lack of a buyer. Investing with British Pearl falls outside the remit of the Financial Services Compensation Scheme. Please refer to the Key Risks section of this site for a more comprehensive description of the risks involved.

British Pearl ® is the trading name of British Pearl Limited (Company No. 7151774), a company authorised and regulated by the Financial Conduct Authority (Register No. 674693) and British Pearl Finance Limited (Company No. 10575280 and Register No. 770867), which is an appointed representative of British Pearl Limited. Both companies are wholly owned subsidiaries of British Pearl Group Limited (Company No. 9701436) and all are registered in England and Wales at 4th Floor, 7-10 Chandos Street, Cavendish Square, London, W1G 9DQ