Now the fallout from Brexit vote has had time to settle and the new LBTT surcharge has also been understood and absorbed how might things play out for investors in 2017?
Interest rates remain at a historic low so borrowing remains cheap and capital values in Scotland are not over inflated. It is these historically low interest rates and the shortage of suitable housing – particularly family-sized homes and affordable first-time buyers’ homes – that will keep house prices rising, according to the latest Halifax House price forecast, although at a lower rate.
Martin Ellis, Halifax’s housing economist, says: “Despite the high level of uncertainty, UK house prices should continue to be supported by the shortage of property for sale, low levels of house building and exceptionally low interest rates”.
Scotland continues to face an under supply of housing which has been a factor in the rise of the private rental sector with the nation’s owner occupation rate dropping by more than 5 percentage points since 2005 to about 60 per cent this year.
In Edinburgh average prices increased by 5.2% in 2016 with an average 5% rise across East Central Scotland. In line with most other market commentators I believe that prices should continue to rise but slow down probably to rates nearer 3%. I also believe there may be a moderate increase in the supply of properties coming on to the market. But since demand already outstrips supply by a considerable margin this will only act to slow some of the higher levels of capital increase we have seen on 2016.
In April this year the changes to mortgage relief for BTL will begin to come into effect and this is likely to have a significant impact on how existing landlords with gearing will choose to manage their assets and additionally on how those looking to invest will access the market.
There are various ways to mitigate against a reduction in income due to the changes to mortgage income relief. These could be choosing lower levels of leverage or transferring properties into a company. But all options need to be investigated in detail as all are linked to an individuals personal circumstances so a holistic approach should be undertaken.
It is time for investors to step up and focus on a 360 degrees approach to investing in property. Property as an asset should be viewed as part of a diversified portfolio and all elements of this should be examined in order to build up and overall investment strategy to maximise returns and mitigate against risk. The secret to coming out on top is to focus on attacking the process of property investing in a new way – a holistic way. With increased levels of regulation, taxation and hence cost it is not enough anymore to simply buy right or negotiate well. Investors need to learn that a more rigorous approach to each property purchase is necessary if they want to reap strong returns. This 360 approach enables a planned and calculated strategy – that will prepare them for success in the many steps of investing in property to come.
As forward thinking asset managers we at Glenham embrace this view and can offer our existing clients a 360 review of their existing assets and through our network of trusted partners we build an investment plan going forward to maximise returns taking into account all areas of an individuals circumstances.
For those looking to invest in residential property we can help by building an investment strategy based on this holistic approach ensuring the client buys the best performing asset possible.
Property as an asset class continues to outperform most others but the route to market is becoming increasingly complex and in order for an investor to benefit from the high levels of returns that can be achieved they really should look to seek best advice from people who understand the market and can help dodge the pitfalls. With Glenhams 360 property investment approach, you can buy, grow and protect your property portfolio with confidence.