The UK property market has returned to growth and confidence has returned following unprecedented disruptions over the last 18 months. This is a great time to expand your portfolio and prepare to make the most of the new property cycle that is underway.
However, there are many misconceptions about property investment which may give a false negative impression of the market. Here, we take on 10 of the most common property investment myths and provide the answers you are looking for.
When a city grows fast enough there are always going to be concerns about whether the market is oversupplied, and therefore whether there are still the same reliable profits to be made. As with much about property investment, this concern can be explored through doing research.
Take Manchester as a case study. The city has become the UK’s property investment hotspot in recent years, and it is fair to wonder whether it has peaked. However, the underlying factors that led to its success have not gone anywhere – in many cases, the conditions are even more favourable now than ever before.
Seven new major sites started in 2023 and took the total pipeline to 11,765 units across the city, with just 867 in the most popular city centre area.
This is a lot of construction, but the reality is that Manchester’s population is growing much faster than this. The city’s population increased by approximately 20% in the last Census period compared to the national average of 6.5%, and there are no signs of that growth slowing in the future.
That means that even these high levels of construction can't match the population growth, and the shortage of available properties will continue.
Discover the best Manchester buy to let location here.
Buying ‘off-plan’ means purchasing a property before construction is complete. This naturally comes with some risks, but by finding the right location and developer, you can avoid them easily.
My choosing a developer with a reliable track record of completing their buildings and delivering strong, profitable investments, you should not have to worry too much about buying before the building is finished. Any reputable sales agent will be able to give you a full history of the developer, as well as providing case studies and testimonials from previous investors.
Likewise, you can remove the concern over future rental demand once the property is complete by choosing an up-and-coming area carefully.
Buying completed properties is the other option from buying off-plan. The attractions of buying a completed, working investment are clear and obvious. What easier way to start earning immediately than to buy a property which already has a tenant?
While that is true, buying completed property often comes with other issues. For one, it is normally more expensive than buying off-plan properties which can often be secured at a below-market rate and will often deliver a large sum of capital appreciation on completion.
Secondly, many existing properties come with maintenance and repairs that need to be carried out immediately, adding an instant cash operating cost onto the investment which will cut into your rental yield. Similarly, an existing property may not be up to modern energy-efficiency standards or have the appropriate safety certificates – all of which can require further remedial works.
This is only the case if you are buying in cash and intend to pay for your property in one go. Otherwise, it is perfectly possible to get involved in property investment with a much smaller sum that acts as the deposit.
Once you have paid that, you can get a mortgage to purchase the rest of the property and pay that back over time either by using your monthly rental income or any other regular income. On the surface, it might seem like property has a high barrier to entry – but in reality, the market is much more welcoming and there are avenues in for people who do not wish to invest so much up front.
In 2024, the mortgage rate is falling again as the Bank of England base rate is reduced, so it is more affordable now than it has been for at least 18 months.
Capital growth is one of the biggest advantages of investing in UK property. The market is growing positively, and people investing in cities like Manchester can secure huge annual gains thanks to its booming market.
However, this is not the only income you can count on. Monthly, passive rental income can be just as important in your planning as capital growth. Indeed, it is this regular monthly income which should form the basis of your long-term planning, and this is especially the case if you are investing to fund your retirement or replace any other form of regular income.
Ronald Garrett, Managing Director at Alliance Investments, says: “While capital appreciation is an important part of investing, we would urge you to look at rental returns as another, equally important income stream. When looking for the perfect market to invest in, the best properties will offer strong growth in both forms of revenue.”
The current economic climate is a risk for some forms of investments like stocks and shares or traditional savings accounts, but property has foundations which have not only insulated it from any turbulence, but allowed the sector to thrive.
The imbalance between supply and demand means that there will always be a shortage of homes in the UK. Even the government's target of 370,000 new homes a year doesn't get near the overall shortfall of 4.3 million homes. That means property will always be a good bet, even in a less favourable economy.
However, in 2024 the economy has turned around and the future looks much brighter. The Confederation of British Industry forecasts that UK GDP growth is projected to rise to 1.0% in 2024. Momentum should continue in 2025, with GDP growth anticipated to reach 1.9% - broadly in line with the average pre-COVID growth rate of 2% between 2010 and 2019.
No, selling an investment property is just as easy as selling any other kind of property. In fact, the aforementioned lack of available homes has pushed demand to new heights and ensures that any property in a good location will be inundated with people wanting to buy it when you come to sell.
You will have to pay Capital Gains Tax on any profits you make from the sale compared to the original purchase price but, again, that is no different to selling any property. The investment market is incredibly strong right now, making it easy to exist the market in future if you need to.
There are many tasks which come with being a landlord. Everything from marketing, conducting viewings, maintenance, paperwork, key handover, inspections and much more need to be taken care of. For many, this is a heavy burden which adds a huge amount of work from day to day, especially for overseas investors who cannot be present.
Luckily, this is easily solved through the appointment of a lettings and management agent who will take care of all of the work in exchange for a small fee which represents a percentage of the monthly rental income.
Your sales agent will be able to recommend a good management company who will be ideal for your property.
For the last 18 months, mortgage rates increased with the Bank of England's base rate. Inflation, the global energy problems and an unstable government made economic conditions challenging. Lenders responded by being more cautious and mortgage rates increased significantly.
Now however, with the economy back on track and the base rate of interest being cut, lenders are once again offering cheaper deals.
Nationwide was the first to get ahead of the market and offer the first sub-4% mortgage rate we have seen in the UK for a long time. The expectation is that other lenders will follow suit in the coming months.
A further base rate cut is anticipated in September, and analysts expect it to fall to around 3% by 2026. That will keep mortgage rates lower than they have been in recent years.
Learn more about the lower mortgage rates here.
It is perfectly possible for overseas investors to get a mortgage in the UK which can be used to fund their buy to let investment, and the process for doing so is simple. While lending criteria can vary, the prospect of investing in UK property with a mortgage should not be off-putting. Overseas investors can be confident in the market, and your mortgage advisor can find the right product to suit your specific needs.
Your affordability criteria will be judged on the projected rental income rather than your individual earnings or limited company income. Typically, monthly rental payments will need to be between 125% and 145% of the monthly interest repayments in order to meet the criteria and qualify you for the mortgage.
If you require assistance with securing a mortgage as an overseas investor, our team can help by recommending an expert in this area.
The Manchester property market is in an extremely interesting place and there is good news across the board – from unprecedented rental growth and extraordinary levels of demand, to impressive office space uptake which promises even more economic growth to come during 2024.
Despite the many property investment myths, 2024 promises to be a good year for investors and the start of another positive property cycle.
Get in touch with our team today to learn about our available opportunities and find your next investment today. Click here for more information