Investing in real estate is a very rewarding endeavor. The more you invest, the more you own property, the more you’ll be able to control your investments, and the greater your property portfolio. This is because real estate is a dynamic industry, and much like other industries, it has a volatile market. Let’s find out the benefits of investing in real estate uk.
When a property is first purchased, its value increases as people want to buy more affordable properties. This cycle continues as the property is sold and the value increases. The best way to ensure that your property remains affordable is to stay updated on the market and invest in properties with a stable value for the long term.
This is particularly important if you have children living at home. Here are some benefits of investing in real estate that you may not know about.
Benefits of Investing in Real Estate UK
High Rental Returns
If you’re looking to invest in real estate, you can’t overlook the importance of rental returns. Rental returns measure the income generated by a property — and it’s also very closely linked with monthly rent prices.
Returns can be calculated as the annual rent divided by the property value, and they show what percentage of the property value is produced by this annual income. Overall, UK rental yields are high-ranging between 8% and 10%.
Rental returns can vary depending on the country’s area in which an investor purchases the property. Nevertheless, the high rental yields make it a good long-term investment for those looking for capital growth with their investment.
The UK property market is changing its outlook towards building quality rather than quantity. This change, combined with the undersupply of rental properties in the UK and a shift towards high-quality housing, has led to a boom in demand for rental accommodation, driving up rents and creating a lucrative market for property investors. This trend looks set to continue growing rental returns in the UK property market.
Capital Growth Potential & Increasing Property Prices
Real estate is a lasting investment. As the value of your property increases over time, your money gets more and more valuable. Real estate is an excellent investment vehicle that doesn’t see as much volatility as other financial products, with tremendous capital growth and low-stress purchase potential.
The UK has already seen an economic recovery from the impact of the coronavirus, and property price forecasts predict the growth of over 20% throughout the country over the next 5 years, with a slower recovery expected in London.
Property is in high demand.
Residential undersupply, in which the number of persons looking for rental houses outnumbers the number of rental units available on the market, is driving the high requirement for residences in the UK.
There has also been a change in lifestyle choices, with many people rethinking their housing options and opting for long-term rentals in more central locations. Because they are comparatively cheap, core, smaller UK areas are gaining popularity among renters, driving rising rental demand.
The demand for rental houses in the UK is primarily made up of students drawn to the country because of its great educational credentials and youth who are about to purchase a home.
The UK has always been one of the most prosperous and wealthy countries globally, and it’s no surprise that its economy is booming as well.
As people continue to spend on big-ticket items such as cars, electronics, furniture, and more, real estate in the UK is also growing at an incredible rate. So what does this mean?
It means that investing in property in the UK could be the best decision you make in your lifetime! Just check out these eight reasons why investing in real estate in the UK could be your smartest investment yet!
The UK property market has grown significantly over time
In 2015, according to a report by Knight Frank and Citi Private Bank, real estate prices increased 6.5% for prime central London properties and 5.4% for all of Britain. In comparison, inflation was only 0.1%. It’s no wonder that many investors are looking to get into property investment in Great Britain.
The current value of properties has been appreciated.
As you may know, it’s very difficult to predict how much any property will appreciate over time. But if there was ever a time when property prices would increase and make investing in UK real estate attractive, now would be it. The last few years have been tough on property investors, but many experts are expecting that prices are likely to rise at some point soon.
Interest rates are at historic lows.
All major banks offer interest rates below 1% on current accounts, while many lenders offer mortgage rates at or below 4%. So if you’re looking to store your cash, then right now might not be a bad time to do so. But if you’re seeking to grow your wealth and what smart investor isn’t? – Then consider investing in real estate instead. Here are 8 reasons why real estate investment might be right for you.
Investors enjoy 100% tax relief on mortgage interest payments
If you are investing for at least three years, you can claim back 20% of your annual interest payments through tax relief. This means that on a £150,000 investment, you could claim up to £30,000 back from HMRC over five years.
That’s a 15% extra return—which will have a knock-on effect on your property’s overall capital value.
Investors can claim back VAT on improvements they make
As an investor, you may be eligible to claim back Value Added Tax (VAT) on all construction and renovation work, enabling you to offset your tax bill. You’ll need to speak with your accountant to get further advice on eligibility requirements, but it can be an attractive way of reducing your tax burden. Some contractors are willing to help investors claim back VAT via special invoices – ask yours if they can do so.
You don’t need any capital if you invest through a limited company.
Many investors are deterred from buying a property because they feel it’s too expensive. If you’re willing to set up a limited company and purchase property through it, you’ll need no capital.
A limited company structure allows non-residents of Britain to avoid paying inheritance tax on properties held outside of an estate.
Increasing Population of the UK
The population of the United Kingdom is projected to rise from 64 million to 77 million by 2027, an increase of 19%. This means that there will be an even larger pool of potential customers and employees for your business and growing demand for goods and services.
High Foreign Direct Investment
The United Kingdom, also known as Great Britain, has one of the highest foreign direct investment (FDI) flows in Europe. With FDI increasing by 47 percent to nearly $200 billion between 2006 and 2012, it is now the sixth-highest among OECD countries.
The increase in FDI was largely driven by asset acquisitions ($80 billion), while other inflows declined since 2006.
The UK is number 1 in The Global Real Estate Transparency Index 2020
The real estate market in the United Kingdom is one of the hottest around, according to The Global Real Estate Transparency Index (GRATI). This report has identified that the United Kingdom ranked high because of its laws regarding transparency and fair dealings compared to most other countries.
Strong Demand for Properties
The demand for properties has been at an all-time high. This makes it a great time to invest and benefit from such strong market conditions. It also means that prices are on an upward spiral, so now’s not a good time to wait around if you’re thinking of making your first investment.
Property values have risen by 7% over the last five years, with no sign of slowing down anytime soon.
Due to the high property costs in London, buyers have started flocking to other regional cities. Birmingham and Manchester, two important cities in the UK’s regional districts, are undergoing massive redevelopment and development projects that will increase connectivity and amenities.
These projects increase the demand for real estate in the area by improving the real estate value in these cities by rendering them more appealing to potential inhabitants or businesses.
Frequently Asked Questions
Is it preferable to invest in real estate than equities in the United Kingdom?
Property can be rented out or developed to increase your profit. Yet, according to investing “experts,” stocks and shares (equities) outperform property over time, needless management time, and may be owned in an ISA.
Is the property a good investment in the United Kingdom in 2022?
Many of us feared an abrupt market correction’ in prices in 2022, which offered many possibilities for UK property. Long-term estimates for both the sales and rental markets, on the other hand, continue to position property as one of the finest long-term investment assets in 2022.
All the points mentioned above prove that it is very beneficial to invest in real estate in the UK.