Is now a good time to invest Is now a good time to invest

Is Now a Good Time to Invest in the UK?

 

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Is Now A Good Time to Invest?



Is Now A Good Time to Invest?



Is Now A Good Time to Invest?



The last few years have been a turbulent time for the UK property investment market. From Brexit negotiations halting people’s faith in the market to the coronavirus outbreak changing how we live, work, and invest, there’s been a lot for investors to adapt to. In the midst of the uncertainty that currently surrounds both the property market and the economy as a whole, many investors are asking ‘should I invest in property right now or wait?’ or ‘is now a good time to invest in the global stock market?’.

Contrary to common belief, despite living through national and local lockdowns due to the coronavirus crisis, right now is perhaps the best time to invest if you want to maximise your investment returns. If you’re a frequent or first-time investor who’s feeling cautious about whether or not you should invest during this time, make sure you read this guide. We look at the resilience of the property market, compare investments in the stock market vs property during this time, and examine opportunities available to savvy investors right now. We also give an informed answer to the question – is now a good time to invest in the UK?

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Is now a good time to invest Is now a good time to invest

Investment During Uncertain Times

In past times of economic struggle, both the stock market and the property market have inevitably been impacted. However, it’s important to also pay attention to the ways that the market recovered following these events. To put things into perspective, let’s look at two of the biggest obstacles the property market and global stock market has seen over the last twenty years.

The Great Recession

The Great Global Recession of 2007 – 2009 had perhaps the most profound impact on the property market to date. According to data from the Land Registry Index, the average price of property in the UK dropped by 18%, with a fall from £189,193 in December 2007 to £154,452 by March 2009. Transactional levels also dropped from 1.65 million to 730,000 from June 2008 to 2009.

While these figures presented a dire outlook for the market as a whole, UK property prices began to recover quicker than expected. By August 2010, average property prices had risen to £173,417, and by mid-2014, had fully recovered to pre-crisis levels.

And what about the global stock market during this time? The Great Global Recession saw stock market prices fall by 49% over a period of 16 months. It then took about four years for the market to recover following the crash.

Brexit

Brexit has had the biggest strain on both the stock market and the UK property market in recent years, although the impact that Brexit had on property prices was not as dramatic as first expected. Following the EU Referendum on 23rd June, both a drop in average house prices and a dip in property market activity had been recorded. According to market data recorded by Halifax, property prices in the UK fell by 1% in July 2016 – a much lower drop than the 10% decrease predicted by the Treasury back in May of that same year.

Fast forward to October 2016, and there had been a sharp rise in the price of UK property, with house prices having risen by £2,623 in just one month. By October 2017, UK property prices had grown by 4.5%, and have continued to grow well into 2020, especially in key regions like the North West. The stock market also experienced a rise in 2019 following the general election, with the share prices of FTSE 100 and FTSE 250 companies having grown by up to 3.4%.

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What's Happened to the Investment Markets in 2020?

On the 12th March, the Dow (Dow Jones Industrial Average) saw a downturn in stock and share prices, with a drop of 10%. This was the highest drop since the 1987 stock market crash. Volatility also surrounded other investment assets such as gold, for which prices plunged during March. It wasn’t until June that stock market prices had risen to a three-month high. However, once it was announced that the UK was in a recession back in August, the FTSE fell once again, highlighting the instability of the stock market throughout 2020.

Due to market uncertainty, UK property prices dropped following the national lockdown back in March 2020. With a slowdown in market activity, average UK house prices reportedly fell by 0.2% in April, in contrast to an increase of 2.1% throughout April 2019.

As of November 2020, however, the UK property market has already made a significant recovery, with prices having risen by 5% in September, followed by a rise of 5.8% by October. According to Nationwide, this is the highest annual rate of growth the UK property market has seen in four years. Not only this, but rental market activity has seen a boost, with June 2020 seeing a 22% increase in rental market demand compared to a year ago.

Mortgages have undergone a number of changes throughout 2020. Due to the coronavirus pandemic and the financial uncertainty it brought, many mortgage lenders limited their availability of 95% mortgages, with some lenders requiring minimum deposits of up to 25%. This made buying a property more difficult for first-time homeowners, and further boosted demand for rental accommodation.

Stamp duty tax is a tax which is normally payable on buy to let properties, second homes, or first-time properties depending on the price. Back in July 2020, chancellor Rishi Sunak announced a stamp duty tax break to last until March 2021, requiring homeowners to only pay stamp duty tax on properties with a value of over £500,000. For buy to let investors, 3% tax is still payable on properties with a value of up to £500,000, which is significantly lower than the usual rate. Since the stamp duty holiday was announced, levels of UK property market activity and property investment during lockdown have soared, with both buy to let investors and homeowners keen to take advantage of tax savings.

The Stock Market Dropped Following the Coronavirus Crisis

On the 12th March, the Dow (Dow Jones Industrial Average) saw a downturn in stock and share prices, with a drop of 10%. This was the highest drop since the 1987 stock market crash. Volatility also surrounded other investment assets such as gold, for which prices plunged during March. It wasn’t until June that stock market prices had risen to a three-month high. However, once it was announced that the UK was in a recession back in August, the FTSE fell once again, highlighting the instability of the stock market throughout 2020.

Property Prices Dipped Due to Covid-19 Lockdown Before Rising to Record Levels

Due to market uncertainty, UK property prices dropped following the national lockdown back in March 2020. With a slowdown in market activity, average UK house prices reportedly fell by 0.2% in April, in contrast to an increase of 2.1% throughout April 2019.

As of November 2020, however, the UK property market has already made a significant recovery, with prices having risen by 5% in September, followed by a rise of 5.8% by October. According to Nationwide, this is the highest annual rate of growth the UK property market has seen in four years. Not only this, but rental market activity has seen a boost, with June 2020 seeing a 22% increase in rental market demand compared to a year ago.

Interest Rates Are Lowered and 95% Mortgages Become Limited

Mortgages have undergone a number of changes throughout 2020. Due to the coronavirus pandemic and the financial uncertainty it brought, many mortgage lenders limited their availability of 95% mortgages, with some lenders requiring minimum deposits of up to 25%. This made buying a property more difficult for first-time homeowners, and further boosted demand for rental accommodation.

Rishi Sunak Announces a Stamp Duty Tax Holiday for UK Property

Stamp duty tax is a tax which is normally payable on buy to let properties, second homes, or first-time properties depending on the price. Back in July 2020, chancellor Rishi Sunak announced a stamp duty tax break to last until March 2021, requiring homeowners to only pay stamp duty tax on properties with a value of over £500,000. For buy to let investors, 3% tax is still payable on properties with a value of up to £500,000, which is significantly lower than the usual rate. Since the stamp duty holiday was announced, levels of UK property market activity and property investment during lockdown have soared, with both buy to let investors and homeowners keen to take advantage of tax savings.

Be fearful when others are greedy and greedy when others are fearful

Warren Buffet

Should I Invest in Property Right Now or Stocks and Shares?

So, is property still a good investment right now, or should you look at investing in the stock market as an alternative? The type of investment you choose to make largely depends on whether you want longer-term returns or short-term returns. Following any dips, the stock market tends to fully recover fairly quickly based on past performance. However, since the stock market is highly volatile, the potential losses investors can experience tend to be higher than those seen through property investment. This is why stocks and shares are considered more of a high-risk strategy compared to property.

So aside from the risk-factor, why is property a good investment right now? Why invest in property at a time of such uncertainty? When you look at property market predictions, all signs point towards a strong future for UK property investment. In five years, Savills predicts that UK property prices will increase by 20.4%, with an even higher growth of 27.3% expected within the North West region.

For those looking to maximise capital growth through their property investment venture and benefit from high long-term returns, this future growth in house prices means that now is a great time to invest. The amount of money needed to spend on a property investment purchase is currently lower than usual due to discounts and tax savings. The covid-19 pandemic led many property developers to offer their properties at a below-market value rates as a way to encourage investments.

Take our latest Manchester investment opportunity, Merchant’s Wharf. This property is available to purchase at up to 55% below market value, and comes with up to 6.5% rental yields. By purchasing property at a lower price than usual, at a time when property prices are expected to rise, you can significantly boost the value of your investment. Thanks to the introduction of a stamp duty holiday in July, those who invest in the UK property market as of late have been able to make savings on their stamp duty tax. Buy to let investors are currently able to save as much as £15,000 in stamp duty tax depending on the price of the property.

If you have the funds available, rather than simply leave your money untouched or dwindle away huge amounts on home improvements, getting started with investing could help you build wealth over time. For high rental returns, enhanced capital growth and the lowest possible rates, don’t hesitate to explore UK buy to let opportunities.

Why is Now a Good Time to Invest in Property?

Maybe you’re a first-time buyer in the UK property investment market. Or, you could just be an investor who usually invests solely into the stock market but is looking for a way to bring their investment portfolio some diversification. Whatever your reason to invest in the UK property market, the time to start investing in UK property is now.

As Warren Buffet once said:

‘Be fearful when others are greedy and greedy when others are fearful’

This quote perfectly summarises the significance of investing during times of economic uncertainty. When others who would normally be buying and selling investments of their own are behaving cautiously, the most successful investors are those who act fast and take advantage of every opportunity to build wealth.

There’s a lot of evidence to suggest that right now is the best time to buy property for investment purposes. While past statistics have shown that property prices tend to drop following rocky periods, this period of low growth is often short-lived. The property market has shown time and time again how resilient it can be, and many savvy investors are taking advantage of recent economic changes that can help them get the most out of their investment.

Many international investors, for instance, have been investing in the UK property market as of late. With the value of the British Pound against the Dollar having fallen in March following the worldwide coronavirus outbreak, overseas investors have been able to take advantage of huge discounts on UK property and maximise their investment returns. While the stock market saw a turn for the worse back in March, the property market has opened up new opportunities for investors wondering what to invest in now in the UK. A lot of investors who had tied up money in the stock market are instead choosing to purchase buy to let property, and reaping the benefits.

International investors aren’t the only group benefiting from below-market rates. A number of UK developers, including those behind upcoming off-plan projects available with RWinvest, have been offering temporary discounted rates on their properties. Savvy investors who are prepared to negotiate will find that they’re able to get the most for their money on top of the already below-market rates that come with off-plan properties. Those who were already thinking about investing have found that by buying property in today’s market, they were able to use the extra cash they’ve saved from discounted property rates and put this towards another investment, or save the lump sum of cash for future ventures.

Investors who recognise that now is the best time to invest in property will find that by the time the Covid-19 pandemic has ended, the property market will recover and investments will have grown significantly in value. As previously mentioned, the property market is already making a speedy recovery, and with predictions for huge growth expected by 2024, UK property prices are showing no sign of slowing down.

How to Invest in 2020 – Five Things to Keep in Mind

 

  1. There’s no doubt that 2020 has been a year of financial crisis for a lot of people. If you’re lucky enough to be in the position to invest some amount of money, be sure to stay calm and rational in your decision making. Don’t rush into an investment without first doing some research to be sure that this is the right option for you.

 

  1. While it can be argued that now is the best time to buy property for buy to let investment purposes, keep in mind that you’ll need to hold on to your investment for a number of years to fully benefit from long-term returns. If you’re looking to buy a property which you intend to sell as early as next year, you’ll miss out on the fantastic growth that’s expected across the UK market. To boost cash flow through both short-term returns like rental returns and long-term returns like capital growth, it’s important to hold on to your property for the right length of time.

 

  1. Remember that diversification is key. If you normally invest in stocks and shares, consider purchasing UK property to add to your portfolio. This way, you’re not just putting all of your money into the stock market which often comes with more market volatility, and you can rest assured that your money is tied up in a high-performing asset.

 

  1. Speak to a financial adviser if you feel you need more information. If you’re a first-time investor who’s still wondering ‘is now a good time to invest?’, seeking financial or investment advice can help you work out whether or not you should go ahead with your purchase. Alternatively, getting investment advice can help you understand the best type of investment to make based on your personal goals.

 

  1. Before you invest in the UK property market, make sure you look for the best deals and discounts. Many property companies, such as ourselves at RWinvest, are offering some amazing deals such as high assured rental yields for a set number of years. These types of deals won’t be around forever, so if you’re interested, you should seek out information as soon as possible in order to boost your investment cash flow.

Find a Buy to Let Opportunity with RWinvest

If you’re still wondering ‘should I invest in property now or later?’, asking ‘why invest in property right now?’, and feeling unsure about what to invest in now when it comes to UK property opportunities, get in touch with RWinvest.

We’re happy to talk you through the fantastic offers currently available and help open your eyes to the fact that the time to start investing is now. During this unprecedented time in the market, we’re utilising all online investment tools, allowing potential buyers to take a virtual tour of their property with the help of virtual reality in order to keep our staff and investors safe. If you would like to enquire about getting started with property investment and would like to take a virtual tour or viewing of one of our properties, please contact us today for more information. To find out more about how the property market could perform in 2021, take a look at our house price predictions 2021 guide, containing a summary of what happened in 2020 and expert insights on what to expect in the coming year.

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Disclaimer

While our articles aim to offer some insight on the best ways to invest, the information we provide shouldn’t be taken as financial advice or tips on managing your money. For in-depth and expert help with your financial planning, we suggest speaking to a financial advisor before making any major personal finance decisions.