Even on the brink of Brexit, 2017 is proving an interesting year for the UK property market as opportunities abound. The Greater London market has cooled but other regions of the UK have seen an increase in investment interest, according to latest research by Rightmove.
“It is expected that in areas in the North, like Liverpool, property prices will be back to the same level in 2017 as before the crash of 2008,” says Doyle.“The savvy investor is realising this and seems to be focusing on very specific area-driven investments now,” he says.
There has been a fundamental shift to the northern UK as buy-to-let investors find value, cheaper properties and immense tenant demand. Doyle says this is set to continue as interest rates will be kept low for years, the UK population is growing and there is simply not enough housing being rolled out.
“This bodes well for the investor as cities like Liverpool, Manchester and Leeds are experiencing excellent returns,” he says. “It is expected that in areas in the North, like Liverpool, property prices will be back to the same level in 2017 as before the crash of 2008.”
Furthermore, according to Doyle there has been a rush to invest in real estate, as this investment class is seen as offering long-term stability, if bought at the right price. “Investing at the right level is extremely important. 2017 is the year that successful property investors stay one step ahead of the trend in order to achieve the right yields. This cycle has been seen before in the past.”
This year many South African investors will be hedging against potential rand/sterling fluctuations by investing offshore. In the UK, the buy-to-let market is still booming, despite global uncertainty, as property is seen as a safe haven for investors.
Doyle has a clear strategy on investing in UK. "You would be surprised how many people get caught up in an emotional purchase quandary. You should always remove the emotional aspect as tenants don't care about views of riverfront or gardens; they want transport, lifestyle and comfort.
“As the UK residential property market is difficult to get onto, so we see more and more people renting in the UK. As investors, we follow nine simple steps and advise anyone who wishes to enjoy property investing in areas like Liverpool to do the same.”
Doyle lists 9 key factors for long distance UK investors affecting the market in 2017:
1. If you want to invest in buy-to-let property in the UK, especially in hotspot places like the North, you first need to look for value. Property prices are increasing but value buying is important. If you buy well, then one can expect a capital increase in the medium to long term. Remember too, that cash flow is the best as this rides out any property blips that may happen in time.
2. Stay well clear of estate agent-listed properties as your competitor will be the emotional or first-time buyer and commission driven agents push up prices. Auctions can offer value, but be prepared to renovate these properties and at a distance it can be very costly. The best option is local knowledge other buy-to-let investors.
3. Buy in areas of regeneration. Space is at a premium in the North West, so keep a look out for new train stations, transport hubs or local councils spending on neighbourhood upgrade schemes. Local councils are unrolling more regeneration plans during 2017.
4. The property must offer lifestyle options that will attract good tenants. Local shops, pubs, a public park and ease of transport are all extremely important and will increase rental income and demand. As city centres increase in value, people are happy to commute to other areas, which in turn increases tenant demand and capital growth in these parts, so stay one step ahead of these developments.
5. Watch your gross yields. Don't touch anything below 9% gross in cities like Liverpool and Manchester, as you might need to contribute every month after general expenses like levies and any bond repayments, if applicable. As property prices increase, these yields will come under stress so investors need to shop around for the right yields.
6. Always allow for management and collection fees of around 10%. You will be investing long distance and don't want the hassle of day-to-day issues. These fees do not seem to be increasing during this year as agents vie for business.
7. Invest to hold, not to flip, or sell on. Property is a slow wealth creation process with a 10-15 year outlook, especially in places like Liverpool. You will be investing for hard currency returns in one of the world’s most vibrant and fastest growing countries.
8. New UK tax regulations have affected the market during 2016, but if you know in which entities to buy, like limited companies, then these costs can be reduced or even negated. Create a successful team around you that will offer the correct advice.
9. Lastly, trust but verify everything anyone tells you, from rental incomes to regeneration plans. Google Street Maps helps with gauging what an investment area is like. Also make use of Rightmove, the property search app, to get accurate sold property values in the postcode region.
In summary, 2017 will be both a difficult, and an opportunistic year for UK property investors. They need to be aware of when and where they buy and look to the future of the region in which they invest. Historically, UK property has always achieved excellent cash and capital results over the medium to long term and will continue to do so.
Two high-yielding Liverpool developments
Doyle says Propwealth has identified two current developments that they believe have good inherent value, both of which are in regeneration areas and have strong tenant demand with 9% gross yields.
Victoria House
Situated in North Liverpool, this is the typical property that is driving the UK buy-to-let market. The small, bespoke, converted Victorian villa consists of two large one-bedroom flats, with floor area of around 51sqm per flat. Both units overlook a huge garden belonging to the ground floor unit. Rental yields are around 6.5% net and prices start at £56 950.
Rice House
This Victorian conversion of three flats is across the Mersey in Wallasey, just over the river from the city centre of Liverpool. It is extremely close to major transport links and to the river. Buses run to Liverpool and the ferry is also a short walk away. By car, the tunnel is a few minutes' drive. Net yields are 6.5% and prices start from £53 950.
Propwealth will be holding one-on-one investment meetings on 9 February in Cape Town and 14 and 15 February in Johannesburg. Email Craig or Anthony on info@propwealth.co.uk, SMS cell 083 250 0388 or book online at www.propwealth.co.uk.
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