Many people wonder “is now a good time to buy an investment property”? Whether you’re looking to diversify your portfolio, plan for your pension or are looking to make your money work harder for you, now could be the right time to consider property.
As well as interest rates being at their lowest in decades and house prices continuing to rise, there are reasons to consider property, even with the expectation of a market correction. This blog post is going to explore 5 reasons why.
1. Low interest rates
Interest rates are at a record low. Many lenders are still offering attractive mortgage packages, both for your own home or an investment property. Following the recent budget announcements and inflation forecast to rise, these rates will not be available for much longer. So now might be the right opportunity to take the plunge and buy fixing your mortgage before rates go up.
2. Housing shortage
There is a massive housing shortage in the UK. The government continues to fall short of delivering 300,000 homes per annum and it is unlikely this will change in the short term. This situation was not helped by the recent pandemic. Whilst construction had been allowed to continue, albeit with Covid-19 restrictions in place, many development sites have suffered major delays. With Britain leaving the EU and consequently a shortage of certain building materials, progress was hampered even further.
To tackle the housing shortage, the government has been looking to overhaul the decades-old planning system. The current system, devised in the 1950s is outdated, bureaucratic and time-consuming. They implemented new permitted development rights (PDR), that permit certain changes of use without the need to apply for full planning permission. Whilst this is great news for property developers and investors, it is only a small step in the right direction.
In his latest Budget, Chancellor Rishi Sunak confirmed that £1.8 billion will go towards building homes on derelict or unused land in England as part of the government's £24bn housing package. This will allow 160,000 greener homes to be built on brownfield land. How this will work in practice and the impact it will have on the housing shortage is yet to be seen.
So all in all, the housing crisis will not be resolved in the short term.
3. Increasing house prices
Even with the changes the government is making, the lack of available housing stock is causing an imbalance of supply and demand, putting upward pressure on house prices.
As of September 2021, the UK house price growth is running at 6.6% with all countries and regions of the UK registering growth rates well ahead of the five-year annual average. This is with the exception of London. According to data from Nationwide, the average (non seasonally adjusted) house price has now broken the quarter of a million pound barrier for the first time, standing at £250,311. With a strong performing housing market, it is more than likely that house prices will go up for the foreseeable future.
When we look at historical performance, property investment has always proven to be a solid long term investment. Property owners and investors have been able to build up strong equity pots over the years. If you had bought an investment property 5 years ago, it is very likely that you would have made a substantial profit if you had sold it 5 years on. Whilst no one can predict the future, it is more than likely that property is still a viable long term investment choice.
4. Tax incentives and holidays
During the pandemic, Chancellor Rishi Sunak announced the introduction of a stamp duty holiday in his 2020 summer statement. These changes to stamp duty were designed as part of the economic response to the pandemic to support the housing sector through the crisis. This incentive offered tax relief for a large portion of property purchases. The stamp duty holiday came into effect on 8th July 2020 and ended on 30th June 2021. A subsequent transition period was implemented between 1st July and 30th September 2021.
The COVID-19 pandemic changed consumer needs for housing, with more and more people looking for homes with home office and outdoor space. All in all, the demand for higher value homes, second homes and rental properties kept stamp duty revenue at a relatively healthy level.
Whilst Capital Gains Tax only comes into play when you sell a property, it is something to take into consideration. In his recent budget announcement, Chancellor Rishi Sunak, against all expectations and speculations, did not increase Capital Gains Tax. This may offer property investors a good chance to get in and out before an overhaul of Capital Gains Tax in the future.
5. Portfolio diversification
It is also worth considering diversifying your investment portfolio. A balanced investment portfolio is where investors invest in many asset classes, thus spreading their risk. With demand still outstripping supply, with the extension of PD rights allowing for more creativity in the property market, now might be the opportune time to get involved.
Property Crowdfunding Investment
For those investors not wanting to purchase an investment property themselves, there is an alternative. Property Crowdfunding gives you the ability to invest in property without the hassle of having to purchase, develop and manage it yourself. And it offers many other benefits.
Crowdfunding platforms offer multiple projects to invest in. Investors can diversify their investments across multiple projects, allowing investors to spread their investment risk. Depending on your own appetite for risk, you can choose to invest in peer to peer loans or equity projects. Peer to peer loans offer fixed returns over a fixed period of time, whereas equity projects tend to offer higher returns, with a higher risk. Learn more about the differences between equity crowdfunding and peer to peer lending
HERE.
Certain projects will allow investors to invest using their pension and/or ISA allowance, allowing them to receive tax free returns, i.e. without paying income tax or capital gains tax on interest or profits earned. Through crowdfunding, investors become part of a like-minded community where they can learn from other investors and the developer.
If the above has left you with a taste to look into property crowdfunding and investing, come and join thousands of other like-minded individuals and learn from the community:
www.simplecrowdfunding.co.uk
At Simple Crowdfunding, we offer both equity and peer to peer lending opportunities and we are authorised and regulated by the Financial Conduct Authority.
Investment Risk
All investments carry risk and returns are not guaranteed. Remember to always do your own due diligence, read the information provided and ask questions.
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