Investments

Marketing February 8, 2019 No Comments

Savings rates beat property price growth

Investing your money in a top savings account over the last year will have earned you more money in returns than the property market, new research has found.

Mutual insurer, Royal London, has discovered the best-buy interest rates were now higher than the annual average property price growth in England.

It came to the conclusion after analysing Land Registry figures, which showed the average home in England grew in value by 2.6% in the past 12 months to £247,430. Meanwhile, the best fixed-rate savings bond, as highlighted by analysts at Moneyfacts, was a seven year deal paying out 2.75% interest.

It means the best savings rate has performed better than the average UK property. Even the best easy access savings account, which currently pays 1.42%, would be enough to beat house price rises in the slowest regions of London and the South East, some areas of which have seen price declines.

Becky O’Connor, personal finance specialist at Royal London, said: “Savings rates have been offputtingly low over recent years, as a result of the rock bottom Bank of England base rate. However they have risen slightly as the base rate has increased.

“Coupled with a decline in the rate of house price growth, this trend has resulted in the most competitive savings accounts now paying more interest annually than property owners typically earned in the last 12 months.

“While it is still difficult to beat inflation with most savings rates on offer, if you live in London or the South East, it is now easy enough to beat the current rate of house price inflation with a savings account.”

Royal London pointed out its research was based on savings accounts with the very best rate on the market. It said the rate and term of a savings account could make a difference to returns you end up with.

Indeed, the returns on individual properties could also depend on a number of factors, including its location and whether it’s a main home or a buy-to-let.

Tax advantages

Royal London is urging savers and investors to remember the tax advantages of pensions and ISAs when planning where to place their cash for the long-term.

O’Connor added: “It’s important to remember that property or savings accounts are not the only things you can do with your money for long term financial returns. Saving into a pension comes with significant tax advantages and over the long term, the performance of stocks and shares investments tend to outperform cash.

“Money that goes into a pension benefits from tax breaks whilst money withdrawn from an ISA is tax free.”

Source: The Money Pages

Marketing December 28, 2018 No Comments

Where are the best investment opportunities for 2019?

With 2019 fast approaching, we asked some of the UK’s leading fund managers to highlight the stocks they are watching closely and to share their outlooks for the new year.

As 2018 draws to a close, there is much to feel nervous about.

The UK is set to leave the European Union in March 2019 and a deal is yet to be agreed; investors have experienced a profound sell-off over the past few months; trade tensions have escalated between the US and China; and the global economy appears to be cooling.

“Global growth is getting harder, with the trade war having a particular impact on China. The US too is finding growth more difficult, as the Trump stimulus package wanes,” explained Jeremy Lang, manager of the Ardevora UK Equity fund.

“There was nowhere to hide for investors in the recent market sell-off, as traditional areas of shelter did not provide any safety,” he added.

Lang suspects that 2019 will be much like 2018, with the market experiencing “many wild mood swings”.

UK outlook

When it comes to the UK market, he notes there appears to be “more palpable gloom and little optimism”.

“This undoubtedly drives strong investor desire for overseas earners.

We are now enticed by areas of the market most other investors hate, as there are increasing odds of a surprisingly benign outcome.

“While still small, the odds of another referendum and a remain verdict are far better than they were weeks ago. Even if we were to see a second referendum, there are going to be a number of hurdles and pockets of anxiety along the way,” he explained.

With this in mind, Lang and co-manager William Pattisson have reduced their fund’s exposure to commodity stocks which earn a large proportion of their earnings overseas.

“We used the proceeds to buy into more domestically-focused value opportunities, such as Travis Perkins,” he added.

Ken Wotton, manager of the LF Gresham House Multi Cap Income fund, notes that Brexit is likely to cause further volatility in the UK market. Nevertheless, investors must remember that this will create selective opportunities.

“While large-cap businesses are generally impacted by macro factors, the agility and niche positioning of smaller companies may allow them to react positively to broader economic headwinds,” he said.

He believes Inspired Energy, which provides energy advisory services, is poised for strong performance in 2019.

“While it advises mid-sized corporations, Inspired Energy is paid in commission from contracts with large energy suppliers, with payments based on the energy usage companies incur. This guarantees multi-year revenue and high earnings visibility for the business,” Wotton said.

Phil Harris, manager of the EdenTree UK Equity Growth fund, notes that the unforeseen variables and endgame scenarios surrounding Brexit may feel like attempting to play “three-dimensional chess”.

In spite of the political headwinds, he is encouraged that the UK economy has so far proven robust.

“With sentiment at multi-year lows and UK valuations reflecting this, we expect to find multiple opportunities across the UK small and mid-cap space for us to deploy our current high levels of cash,” Harris explained.

Better opportunities elsewhere

David Coombs, who manages the Rathbone Multi-Asset Portfolio range, and assistant manager Will McIntosh-Whyte note that Brexit has so far divided the nation and slashed the amount that businesses have invested here.

“Yet the UK has muddled through so far. Wages are rising, albeit slowly, retail sales were okay despite some high-profile high street failures and business surveys remain in expansionary territory. We don’t think the UK is doomed, but we see better investments elsewhere,” the managers explained.

Looking ahead, as central banks around the world tighten monetary policy, the managers suspect that share prices will come under pressure.

“That’s just the way valuations work: as the rate you get for taking zero risk goes up, the value for risky cash flows goes down. While this will likely cause another bumpy year for stock markets, it does come with benefits.

“Government bond yields are returning to levels where they should offer better protection for portfolios. And for rates to rise, that’s usually because countries are growing and deflation is out of the picture,” they added.

Against this backdrop, Coombs and McIntosh-Whyte expect well-run businesses with low debt levels to prosper.

Source: Your Money

Marketing December 5, 2018 No Comments

UK stocks could surge when Brexit is settled

The bounce seen in global equity markets since the end of last week as a result of an improving political environment could be replicated in the UK if the Brexit process comes to a stable conclusion.

This is according to Russ Mould, UK investment director at AJ Bell.

His comments came as Asian and emerging market equities opened strongly this morning (December 3) following progress in the trade dispute between the US and China, with our sister title the Financial Times reporting that US president Donald Trump is to offer a “truce” in the dispute.

Mr Mould said the swiftness of the response by investors to the change in the political rhetoric indicated that if a similar change in the political weather were to happen in the UK, then the UK equity market would also increase sharply.

He said the UK market has underperformed all other developed equity markets in 2018, an outcome that has left it on a valuation multiple of just over 11 times earnings, which is considerably less than the long-term average for the market of 18.

The yield on the UK market of 4.8 per cent is also greater than that offered by other markets, and Mr Mould said this makes those markets “cheap.”

Aninda Mitra, senior analyst at BNY Mellon, said the market is “elated” by the developments in the trade dispute but he added that the reprieve could prove temporary.

Markets have also been boosted by comments from Jerome Powell, chairman of the US Federal Reserve, who stated last week that US interest rates may be approaching the peak level for now, and so not need to rise by as much as the market had previously expected.

Ed Smith, head of asset allocation research at Rathbones, said the move by Mr Powell has boosted markets, but that a change in relations between the US and China would provide an even bigger boost.

Jonathan Davis, Chartered financial planner of Jonathan Davis Wealth Management in Hertford, said there have always been issues in markets but investors should remember that this has not stopped equities rising consistently over the past century.

Source: FT Adviser

Marketing September 25, 2018 No Comments

Property investment: the four property types you should avoid

When it comes to property investment, I always emphasise the need to have personal goals.

What you want to achieve from your property journey will be different to another investor and, as such, the type of investments you put your money into will differ too.

That being said, there are some investments that I wouldn’t recommend to anyone.

Student pods

You buy a room within a purpose-built student block and rent it out to students. Many will come with a guaranteed rental return for a period of one or two years. What’s not to love?

Well, lots actually. Firstly these pods are almost always overpriced, that guaranteed return you’re getting will have been factored into the asking price.

Secondly, the resale market is virtually non-existent. You can only sell to other investors. And your tenant market is also severely limited.

Finally, there is very little possibility of capital growth. Prices will only rise if yields do.

Hotel rooms

Hotel room investments are similar to student pods.

You buy a hotel room, a management company rents it for you, and you get a return. It’s a hands-off investment – which can be many attractive to investors.

What’s not so attractive, of course, is the fact these too have a capital growth issue and a distinct lack of a resale market. What’s more, you’ll be hard pushed to find a lender willing to lend to you on such an investment.

Overseas ‘hotspots’

I’m certainly not suggesting overseas investments are a bad idea in general. However, you should be wary of areas marketed in a particular way.

We’ve seen what happens when marketers get overexcited. A few years ago Bulgaria and Spain were the locations what we’re heading for a boom; prices were going to soar, so investors and developers had to get in quickly. And now? Prices have plummeted in both countries, and thousands of homes stand empty.

Be cautious around claims of price rises. Do your own research, don’t focus too much on price, look at yields and, as ever, consider the fundamentals of the area.

Bargain properties

It is certainly possible to get a property bargain.

If you’re able to have other points of negotiation, you could get a great deal on a property. But if a property price seems too good to be true, assume that it’s not and do your research.

There’s very little point in buying a family house to rent out – even if you get it for rock bottom price – if nobody wants to rent it!

Check the rental market, the local amenities, the employment opportunities before getting carried away by a bargain.

By Rob Bence

Source: Love Money

Marketing September 11, 2018 No Comments

What do tenants want from your UK property investment?

From bedroom numbers to proximity to local work and education hubs, a new survey reveals the amenities young British tenants prioritise, giving investors an insight into what makes the strongest investment property.

Summary:

Young UK tenants reveal the things they want when looking for a rental home
40% of 18 to 24-year-old renters in the UK state bedroom numbers as being very important
A quarter also believe that it’s very important to live close to work or university, highlighting the need for investors to focus on prime city centre locations

Are you targeting the type of property that will attract and retain UK tenants?

New research, published by online comparison site GoCompare, reveals the things that makes a rental property attractive to young British tenants.

When asked what they look for when finding a new rental home, 40% of 18 to 24-year-old renters believe that the number of bedrooms a property has is very important, suggesting young tenants are prioritising one and two-bedroom homes and apartments over studios.

Location is also another key priority. 48% of young renters state that living close to work or university is somewhat important, while 25% believe that this is a very important factor.

30% of 18 to 24-year-olds also want to move into an apartment that’s unfurnished.

The survey also revealed that 40% of tenants did not state whether they wanted to own a home in the future or not, underlining the changing attitudes towards ownership in the UK. Separate research published earlier in 2018 suggests that up to one-third of millennials (those born between 1980 and 1996) will now rent their entire lives.

All of these things that tenants now demand is driving the growth of the purpose-built rental sector. Buy-to-let, formerly the UK’s preferred rental sector, can no longer deliver the type of high-quality property in central locations that young renters now want.

Instead, investor interest is now shifting towards prioritising modern, city centre accommodation that young tenants will pay a premium to access.

Source: Select Property

Marketing September 1, 2018 No Comments

Midlands Seeing Investment Property Market Growth

The East and West Midlands are seeing growth in buy to let investment property purchases.

New research from Paragon, which surveyed a total of 680 landlords, found that buy to let mortgages for property purchases have fallen by approximately 40 per cent overall since 2015.

However, landlords in the Midlands are challenging this trend. Strong economic growth in the region fueled by Birmingham’s successful regeneration and a plethora of universities have made the region particularly desirable for investment.

Further stimulation came from several financial service firms relocating their head office and operational functions outside of London to Birmingham. HSBC and Deutsche Bank recently made the move, while further activity is expected in the city ahead of the 2022 Commonwealth Games.

Tenant demand was also seen to be increasing in the region. 42 per cent of landlords in the East Midlands had seen a surge in demand, while 33 per cent of landlords in the West Midlands noted the same trend. These figures are particularly high when considered in comparison to the 24 per cent of all landlords who noted rising demand.

Rental in the region were also strong. Landlords in the East Midlands reported average yields of 6.7 per cent while those in the West Midlands saw yields of 6.2 per cent. In comparison, the research also discovered that landlords operating in Central London were least likely to be buying property. In fact, a net 16 per cent of those in the capital said that they had sold some property in the first quarter.

Managing director of mortgages at Paragon, John Heron, said: ‘These findings highlight a big regional difference in landlord experience and buying habits. Some Central London landlords appear to be scaling back a little while landlords in the Midlands continue to invest on the back of a positive outlook.’

Source: Residential Landlord

Marketing August 27, 2018 No Comments

Issues to consider when investing in property

There are many issues to consider when investing in property, some of which are fairly obvious while others might make you think. We will now take a look at some of the more important issues to take into consideration.

LOCATION, LOCATION, LOCATION

It goes without saying; the location of any property investment is key to the long-term success and maximising return on investment. There are some relatively simple factors to consider which include:

• Local economy
• Demand for property in the area
• Growth drivers including future developments
• Property price ceilings
• Rental value ceilings

In many ways, the process of investing in property should in the early days be a relatively simple tick box exercise. If the relevant number of boxes are ticked then it is time to do more research.

FUNDING – INVESTING IN PROPERTY

There are very few property investment opportunities today which do not require some form of deposit. It is essential that the deposit does not stretch your finances to a level where you may well struggle in the event of unforeseen financial events.

• Leave yourself some financial headroom
• Ensure monthly payments are affordable
• Remember to switch to lower rates where applicable
• A buy to let property should be self-funding
• Never assume 100% occupancy with buy to let

There are different funding vehicles available for different types of investments so it is worth taking on board the advice of a mortgage specialist. It may also be worthwhile looking at crowdfunding which is gathering momentum.

CASH FLOW

Is all good and well having the best investments, paper profits but if you do not have sufficient cash flow to cover your short to medium term financial requirements, this can cause major problems.

• Avoid overextending your finances
• Resist the temptation to grow your property portfolio too quickly
• Make full use of equity built up in your property investments
• Ensure your income is always significantly greater than your outgoings

They say that “cash flow is king” and it is only when you are struggling with cash flow that you will realise exactly what this means. Profits on paper are great but if you do not have the cash flow to support them it can cause major problems with fire sales, etc.

EXIT STRATEGIES

It is bizarre when you realise that the vast majority of people investing in property give no thought to how they will exit and bank their profits. You should always have an exit strategy in mind in the event of unforeseen circumstances or long term changes to your life.

• Tax efficient investment is important
• Whether an outright sale, remortgage or some other option, always have an exit strategy in mind
• Set yourself a long-term target and exit route
• A portfolio of properties with strong cash flow can be easier to sell than individual properties

It is all good and well having significant paper profits but at some point you will need to realise these returns. There will be situations where it is more attractive for investors to buy a group of properties with strong cash flow than cherry pick individual assets. You should also consider how your family might manage your investments when you are no longer capable.

Source: Property Forum

Marketing July 16, 2018 No Comments

Investing in properties for retirement is no longer sustainable

Nearly one million private landlords face a pension black hole after new laws and regulations mean the income from their properties won’t sustain them in retirement, MakeUrMove has found.

Some 43% of private landlords invested in a property to provide for themselves in their retirement, with many actively encouraged to do so as a safe, secure retirement option.

However three quarters of those landlords said they will consider selling their properties if they start to make too small a margin, or fall into the red due to additional costs.

Alexandra Morris, managing director of MakeUrMove, said: “Smaller, casual landlords have been impacted by rising costs of managing their properties, with 38 percent citing the high cost of repairs as one of their biggest concerns.

“The problem impacts landlords with a buy-to-let mortgage the most severely, as these additional overheads, combined with recent changes to the private rental sector, mean smaller landlords hoping for a steady income in retirement are now worrying that their properties won’t even cover their own costs.”

A surge in supply of properties on the housing market could mean these landlords struggle to sell, leaving them unable to cash in their pension investment or being forced to sell for less than anticipated.

The problem disproportionally affects older landlords, who have little time to make changes before they need to rely on their properties for a retirement income, with those over 55 most concerned about making too small a profit on their properties.

Investing in property as a pension plan is more prolific in the over 35’s, with 47% of this age group admitting to doing so, compared to just 24% of their younger counterparts.

Eileen Cooper, a landlord with two properties, has felt the impact of changes first hand. As a self-employed, part-time landlord, Cooper was relying on the rental properties to provide an income later in life.

She said: “We planned to buy another property once the mortgages on our current rental properties are paid off, however we have now decided against this due to the new laws and regulations brought in by the government, along with the ongoing changes to the tax system, which make it much less viable as a long-term investment.

“Due to changes in laws and regulation, the time required to manage the properties isn’t worth it.”

Source: Mortgage Introducer

Marketing June 19, 2018 No Comments

3.9 million over 50s plan to use their property wealth to fund retirement

One in five (19%) over 50s are relying on income from property to fund their retirement, OneFamily has found.

This increasing trend is being driven as a result of soaring property prices over the last 20 years, as well as decreasing pension pots and longer retirements.

The UK’s over 50s have particularly benefitted from increasing property prices, now owning an estimated £2.3 trillion of the nation’s total £4 trillion property wealth.

Nici Audhlam-Gardiner, managing director, OneFamily lifetime mortgages, said: “It’s clear from the research that homeowners are seeing their property as a cash cow to fund their retirement, and with the dramatic house price rises we have seen, investing in property seems like a wise option.

“This is particularly true as we see income from pensions, both state and otherwise, beginning to decrease.

“Those not taking advice may often not realise that as well as downsizing there are other options to fund your later years, whilst saying in your forever home.

“We’d urge homeowners approaching retirement to consider all the options open to them, and speak to a financial adviser, as how you fund retirement is one of the most important financial decisions you will ever make.”

With house prices having rocketed by over 300% in the last 25 years and the average homeowner over 50 owning a home worth over £225,000, the number of over 50s using property is set to increase.

While currently one in seven (15%) retirees use property to contribute towards their income, this is set to increase to one in five (22%) over the next decade.

The most common ways people will use property to fund their retirement include a buy-to-let investment, which will account for 33% of the retirement income for those planning to do it.

Some 1.8 million properties will be sold as over 50s downsize, accounting for 28% of the retirement income for those planning to do it.

And the UK’s over 50s will access an estimated £37bn by taking out lifetime mortgages. On average, a lifetime mortgage is taken out for just over £90,000.

Over 50s planning to take out a lifetime mortgage at some point estimate it will account for 28% of their retirement income.

This reliance on property over pensions can be put down in part to people’s perceptions that investing in bricks and mortar is a better bet than pensions.

Over a quarter (26%) of over 50s who have or plan to use property to fund their retirement said that property investments are more reliable than pensions, 27% said their property is worth more for their retirement than their pension, and 15% thought pensions simply can’t be relied upon.

Despite the number of over 50s planning to use property to fund their retirement, many people may not have fully explored the options available to them when planning their finances for retirement.

Only 37% of over 50s have or plan to consult professional financial advice. However, of those that had used financial advice, the vast majority (84%) felt it was useful or essential to their financial planning, particularly when it came to considering different products, such as lifetime mortgages or enhanced annuities, which they otherwise would not have considered (46%).

Source: Mortgage Introducer

Marketing June 12, 2018 No Comments

Manchester tops list as best UK city to be a property investor

Manchester has been ranked as the UK’s number one city to be a property investor by a new survey
Price comparison website Gocompare compiled the list based on average yields, property prices, growth and housing supply
It comes at a time when the north-west city continues to attract huge levels of international investment

It’s official – Manchester is the best city in the UK to be a property investor.

That’s according to Gocompare, one of the country’s leading price comparison sites, who has just ranked the north-west city as the number one city in Britain for real estate investment.

To compile its ratings, Gocompare analysed and ranked cities based on their average property prices and rental yields, in addition to levels of housing supply and rental price growth to determine future investment performance.

Manchester’s greatest strength was found to be it average rental yields; at 5.5%, they are currently highest in the UK.

London was second in the list but, despite rent prices being higher than Manchester, significantly higher property prices mean that investors in the capital achieve among the lowest yields in the country.

Belfast, while having one of the UK’s lowest average property prices at £122,434, was ranked last, with average yields standing at just 3.77%.

The findings come at a time when Manchester is increasingly becoming a hotspot for international property investment. Recently published research from Juwai.com, China’s largest overseas property portal, outlined that there was a 255.6% increase in enquiries for real estate in Manchester in January 2018 over the same period in 2017.

Based on current LendInvest data, property investors in Manchester could achieve 67% higher returns than in London and, with one of the UK’s fastest growing populations and a property market struggling to keep pace with demand, more investors are starting to switch their long-term focus on the city.