Brexit and investing in property

When the decision to exit the European Union was announced in June, estate agents reportedly saw people pulling out of high end property deals the day after the vote, as economic uncertainty hit the country.

Brexit Polling StationYet less than 12 weeks after the Brexit vote, the UK property market still appears with buoyant, with house price values in Britain increasing by 8.3% in the year to July, taking the average home price to £216,750.

The data also showed that month-on-month house prices in June increased by 0.4% – despite warnings ahead of the referendum that a Brexit vote would sink the market.

Brexit

So, were worries over Brexit unfounded? The figures seem to indicate so, but of course, it will be another two years until we actually leave the EU, and anything can happen.

At the moment, however:

  • While no one can predict for certain what will happen to the housing market, the fact that the Bank of England reduced the interest rate to 0.25% should encourage more lending for property purchases.
  • And, for would-be landlords, the good news is that people still need somewhere to live, so there is still demand for rental properties.
  • While the pound is weak, this makes investing in the UK post-Brexit more attractive to overseas buyers, which helps fuel the economy.
  • Businesses are still investing in the UK – for example, pharmaceutical firm GlaxoSmithKline are investing £275m to expand its UK manufacturing sites.
  • Overseas companies have given the country a vote of confidence, too, including Japanese car giant Honda backing post-Brexit Britain with a £200million investment boost and German supermarket Lidl investing £1.5bn over the next three years in building new stores, refurbishing existing ones and developing new product new lines.

This suggests that investing in property post-Brexit could still be worth doing. So, hat do you need to consider if you want to invest in the UK property market post-Brexit?

Choose a promising area

While property price forecasts are exactly what they say on the tin – forecasts – they can still be useful in making an informed decision as to where to invest. Check out websites such as Savills and Knight Frank who regularly publish forecasts by region.

This will give you an idea of places where you may attract more growth and/or rental income.

Financing your investment

Firstly, if you need help with financing your investment, interest rates available on Buy To Let (BTL) mortgages are at the lowest they have been for a long time, meaning you can take advantage of an attractive deal.

When comparing mortgage interest rates, do allow for the fact that they will eventually rise and make sure that you could comfortably afford any sudden mortgage interest increases.

Negotiate

There are plenty of stories in the press of homes that were sold subject to contract before Brexit, then suddenly lost their buyer after the result of the vote was announced.

This forced people looking to sell to re-market their properties and / or drop the price – especially those caught in the middle of a chain who desperately needed a quick sale to stop the whole chain collapsing.

This need for a quick sale could mean that a seller is more willing to negotiate, so haggling on the price may get you more bang for your buck.

Don’t forget the pitfalls

While property investment can bring financial rewards, it isn’t a fool-proof way to get capital growth – otherwise everyone would be doing it.

Being a property investor has tax implications as well as additional costs associated with running a let property (e.g. insurance, maintenance, mortgage repayments and so on).

And don’t forget that some properties can sit empty for a period of time – bringing you no income whatsoever.

So, be realistic and remember that this is a business. Think with your head and don’t follow your heart.

Invest in bricks and mortar

If you are looking to diversify your investments portfolio, but are worried about the risks (and hassle) of buying your own investment property, there may be another way. Property investment companies – who match you to a suitable investment or property developer needing finance – are becoming popular.

Also known as property crowd funding, this can be a way to invest in bricks and mortar, but with less financial risks (as the borrower is thoroughly vetted, so there is less chance of a default. If they do default, the property crowd funding company can seize the assets and recoup the monies wherever possible).

What next?

The only thing guaranteed in life is death and taxes. So while the property market has apparently come through Brexit fairly unscathed and is still proving itself to be a way of preserving and building wealth, remember that you could still lose any money that you put in. So, do your research and make sure that any potential investment matches your attitude to risk.

FJP Investment is a team of investment specialists sourcing a wide range of investment opportunities both in the UK and overseas. You can learn from investors that have already invested by reading through the FJP Investment reviews.