12:29 PM, 21st December 2015, About 6 years ago 1
The question that most property investors and people who are looking to buy an investment property ask themselves: is property investment really viable?
Since the GFC and with recent proposals that could see a 3% tax on the purchase of properties that are intended to be rented out and phasing out of interest costs and furniture replacement allowance, it may seem like it will become expensive and harder to maintain an investment properties. However despite that, investment properties will continue to rise in price over the next 5 years.
Supply & Demand
The market at this current time is saturated with home buyers looking to buy investment properties with not enough houses on the market. The reason that this is so prevalent at the moment is due to government incentives and lower interest rates making now a perfect time to buy. It is expected to continue being a seller’s market unless the government loosens the regulations on building your home.
First Time Buyer Incentives
One of the main reasons that there are so many people who are able to think about buying a house is due to the government schemes in place that allow for a lower deposit such as Help to Buy and Right to Buy. As it looks like the government is expected to extend these schemes helping first time buyers, the demand are one bedroom, two bedroom and three bedrooms homes are expected to either remain at the current level they are now or increase over time.
Property Investment Is Best
Even with proposed taxes and removal of tax cost tax, property investors can expect to earn a higher return on their investment when it comes to property. When taking into consideration other investment opportunities such as the stock market or long term investments with a bank which are currently earning next to no interest, the property market is very attractive as a good investment as the demand will always be there. As property prices are expected to continue to climb over the next 10 years, the return on your investment becomes higher as well as being provided with rental income which should cover your mortgage costs, agent fees as well as maintaining the property. If you can manage your cash flow well, the return on your investment will only increase over time.
Interest Rates Staying Low
After nearly a decade of 0% interest, it was increased to 0.25% which may encourage the Bank of England to increase interest rates in the near future. However any increases to interest rates are likely to only be moderate and prolonged to continue to encourage gradual economic recovery. Inflation is not expected to rise as well due to the increased US production, the entry of Iran and supply. As increases to the interest rate would normally make property investment seem unattractive, there is no need to worry at this stage as increases are expected to be nominal and drawn out over a long period of time.
As with most of the world, the UK’s population is increasing, not decreasing. Especially when you take into account the increasing immigration into the UK and overall population growth, the demand for family homes will only increase over the next few years.
Investing in a property is a great idea for a number of reasons at the moment: owning a property is cheaper than renting, property is a relatively safer investment opportunity, ability to earn money every month and demand is expected to stay the same or increase. Even though the rate of return on the investment of a property is expected to only be moderate, there is still potential to earn much more than on an investment in ISA or saving which are traditionally seen as ‘safer’ investment ideas.
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