Can the UK property market survive Brexit? | Fin24
 
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Can the UK property market survive Brexit?

Sep 22 2017 15:13


ADVERTORIAL

Brexit and landlord taxes have sent the London property market into tail spin. Can the wider UK property market be tarnished with the same brush? Is it all doom and gloom? Uncover pockets of value and potential benefits that can be reaped during this period of uncertainty.

The world is keeping a close eye on Britain and how it navigates a Brexit deal with the EU. Whilst it is an uncertain time, due to Britain’s reputation of being a stable country with a good economy and political system, businesses are still eager to trade in the UK. International businesses such as Siemens and Toyota have confirmed that they do not intend on leaving the UK following the

Brexit decision, and many other large corporations and banks have also confirmed that their headquarters will remain in the UK. Once agreements have been met, Britain will have free reign to trade with other countries, without having to comply with the EU’s framework. This will allow Britain to reach more favourable trade deals and thus will provide a more attractive environment for business.

It is understandable that some may want to wait until an agreement has been reached before investing in the UK. But those who choose to invest now can reap the reward. The uncertainty regarding what deal will be reached has affected the value of the pound, which is trading at low levels against the rand and other currencies. The current pound value could present the perfect opportunity for investors to buy property, as they will be getting more for their money and it will allow them to achieve higher yields than they could otherwise have made. In the longer-term, investors can also get better levels of capital growth as when the pound increases in value again, as too will their property.

For UK property investment advice, One Touch Property Investment are holding one-to-one consultations in South Africa around Cape Town and Johannesburg from now until the 29th September 2017. 

Book a one-on-one consultation today.

Clearly, large investors have not been swayed by Britain’s decision to leave the EU and have continued to buy up property. Shortly after the general election, London’s Walkie Talkie building was sold to Hong Kong investors for £1.3bn, boosting confidence in the UK’s property market and economic landscape.

Retirement homes – A robust sector where demand is unaffected by Brexit uncertainty

A lack of supply of suitable retirement homes has led to an overwhelming proportion of Britain’s elderly population choosing to remain in their existing family home. Currently only 1% of over 50s in the UK live in retirement developments, compared to 17% in the US and 13% in Australia.  Yet around 40% of households can afford to downsize and have at least £50,000 left over. So why isn’t more being done to ensure the elderly can live in homes appropriate to their needs?

In the UK, over 65s own over ZAR 25 trillion in housing equity, or approximately 43% of the UK’s total according to a recent Savills report. A large percentage of those own their home outright so there is no pressing need to downsize, save for the benefit of community living that a retirement village may offer. It is just difficult to leave a family home; a familiar place that holds many memories. Perhaps it is the distinct shortage of good quality retirement homes with additional lifestyle services that the increasingly discerning retirees are looking for. 

The increasing popularity of luxury retirement property – and the benefits of investing in it

Over the next five years, Britain’s population of over 65s is predicted to grow four times faster than any other age group, and they are wealthier than ever before. According to Knight Frank, over 60s in England alone have ZAR 31 trillion in unmortgaged housing wealth, and investors are spotting opportunities to make high returns. Since 2011, private investors have poured between ZAR 52bn – ZAR 67bn into specialist retirement housing according to Jeremy Porteus, who has advised the government on spending for houses for the elderly. 

Recognising a strong demand, several companies have begun developing luxury retirement communities, aimed at those who wish to live in a community of likeminded individuals and take part in a variety of activities organised by the retreat’s management company. These types of care homes pride themselves on being well-maintained and well-run, they are often conversions of Grade II listed buildings and boast new state-of-the-art facilities. In-house prolific chefs who have previously worked at Michelin-star restaurants cook meals from scratch using locally-sourced ingredients, and if it is a hobby, residents are encouraged to help cultivate the community’s gardens and grow the plants and herbs.

Ocean View is one such luxury retirement retreat, based on the idyllic Sandown bay on the Isle of Wight. Visitors can enjoy a dip in the outdoor heated pool overlooking the seafront, enjoy a treatment or two at the on-site hair and beauty salon or catch a film at the multimedia cinema room. Group activities include fine dining experiences, wine tasting and group trips exploring the Isle of Wight. 

With typical studio apartments, at Ocean View, costing under ZAR 2,500,000, this type of commercial property investment bypasses stamp duty fees, and investors can make a healthy 10% return per annum which is structured as a 10 -year commercial lease. The operator runs their business from the premises and provides all the services to the would-be occupant, whilst the owner enjoys passive income. This is why this sort of UK property investment could prove to be an ideal addition to an overseas landlord’s portfolio.

The nations favorite – UK student accommodation

UK is the second most popular destination for foreign students and it is easy to understand because 18 of the top 100 global universities. The appeal of studying in the UK is clear; whether student prefer the charm of cathedral cities like Canterbury and Chester or the buzzing nightlife of London and Liverpool, each offer a unique history and experience. International students are drawn to England to immerse themselves in the British lifestyle and make future business connections, after all some of the world’s top global multinationals are listed in the UK.

Brexit has created a positive windfall for FTSE 100 companies which generate the majority of their income overseas. As the pound has devalued, incomes have risen in pound terms. The FTSE 100 companies are not the only beneficiaries of the falling pound; the number of overseas students has increased by 4% to the number of international students accepted has increased by 4% to 30,350.

As the pound has fallen, it has made it relatively cheaper for International student to study in the UK. The slight drop-off, of only 3%, from European students has more made up with an influx of student from China, India and Singapore. 

Acquiring a purpose built student property makes sense to the parents of foreign students who will be forking out ZAR 118,000 on rent each year. The model is simple, purchase an en-suite student property like Oakwood House in Sheffield, for ZAR 1,008,000 and receive an 8% net income paid quarterly after all management costs. The income received could be used to pay for one’s own child accommodation costs or retained as a pure investment and rand hedge.   

Of course, the effects of Brexit have been felt, however this has been mainly contained in the central London property market, where prices continue to slump. According to the Royal Institute of Chartered Surveyors, the property market remains resilient elsewhere in the country. Also, students will continue to need accommodation, and Britain’s population is ageing so there is an increased need for retirement facilities, regardless of what is happening with Brexit.

One Touch Property is a UK-based property investment company, owned by a South African who understands the plight many of his fellow countrymen are facing in terms of political uncertainty and the value of their savings. The One Touch property team of consultants, tax and forex experts will be available for meetings and consultations in South Africa for a limited time from the 18th – 29th September 2017.


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