There are 3 underlying economic fundamentals that make a strong investment case for residential real estate. A city with an expanding population, a strong GDP and rising salaries as well as a shortage of appropriate housing will naturally put pressure on the housing market, causing prices and rents to rise. Let's take a look at some of the latest statistics compiled by Oxford Economics, ONS and JLL that make Manchester's investment case strong for 2022.

Manchester Overview

Greater Manchester is a metropolitan county in North West England and is home to 2,854,540 people. It includes ten metropolitan boroughs: Bolton, Bury, Oldham, Rochdale, Stockport, Tameside, Trafford, Wigan, and the cities of Salford and Manchester. It is one of the country's largest metropolitan regions, and the second-most populous area in England, outside of London as of 2021.

Due to its large population, Greater Manchester is one of the most economically diverse regions in the UK and is one of the main drivers of the northern economy. At present, there are approximately 1.4 million jobs that contribute towards Greater Manchester’s GVA of GBP67.2 billion (2021). The Greater Manchester area generates nearly 40% of total output (GVA) in the North West and 19% across the North of England. Manchester, Salford and Trafford have seen the largest growth over the last 21 years, contributing 56% of Greater Manchester’s GVA in 2021.

Demographics

Manchester underwent a significant transformation during the Industrial Revolution, attracting entrepreneurs and manufacturers in abundance. The population grew consistently year-on-year until the 1960s, when a number of manufacturing jobs began moving to countries with significantly lower costs. This ushered in a period of economic decline and depopulation for Manchester.

The trend persisted until the early 2000s, when a combination of natural population growth and inward migration (as a result of renewed economic growth), saw the number of residents in the area begin to rise once again. Manchester’s working population has increased by 25% in the last 20 years, compared to the UK national average of 11%. Manchester City is currently the 5th most populous city in the UK, registering 558,840 residents as of 2021. Combined with Trafford and Salford, the total population for the area is expected to reach more than 1,154,970 by 2035, a 36% increase since 2000.

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Economy

As a result of successful economic initiatives such as the Northern Powerhouse project, Manchester’s GVA has grown by 63% since 2000, totalling GBP41.3 billion as of 2021. Following a small dip in 2021 due to the global pandemic, the economy is expected to produce GBP55.6 billion per annum by 2035. At the same time, average GVA per capita has risen 31% since 2000 and is expected to increase by a further 24%, reaching GBP48,111 by 2035.
Manch Economic Growth
Employment & Incomes

The city of Manchester is the economic hub of the Northern Powerhouse. Residents have therefore experienced significant wealth gains, with average household disposable incomes increasing by 92% between 2001 and 2021. This trend is expected to continue, with households seeing a further 51% gain over the next 14 years.

The number of households in the city earning less than EUR35,000 per year is declining at a rapid rate. At the same time, the number of households entering the middle-and-upper-income bands is rising dramatically. By 2035, the number of households in the higher income brackets will have grown by 288% since 2021 and 1,346% cumulatively since 2010.

Housing Market

Despite the considerable progress in construction activity, the housing supply has been unsuccessful in meeting demand. Since 2011, 37,460 units were added to the housing stock, which totalled 455,015 units as of 2020. As a result, there is a substantial undersupply of homes, with just 34% of the city’s housing needs fulfilled over the past 9 years.

It is expected that 5,545 housing units will be completed per year between 2020 and 2031, below the average annual housing requirement of 6,515 units. By 2031, an undersupply of at least 82,505 housing units is anticipated, taking the previous backlog into account.

Due to a consistently undersupplied housing market combined with substantial economic growth, house prices have increased by 82% over the past 10 years, compared to the national average of 53%. House prices are further forecast to grow 23.5% between 2020 and 2026, despite the implications of Brexit and COVID-19.

Manchester city’s rent has increased by 21% over the last 5 years, compared to the broader North West region at 11% and England at 7%. Between 2022 and 2026, rents in Manchester City are expected to increase by a further 15%, surpassing the national average of 10% over the same period.

What does this mean for investors?

A healthy population growth rate coupled with an undersupplied housing market have made Manchester an ideal opportunity for investment -but not all investments are made equal. Speak to a Wealth Manager at IP Global about the other factors to look for before purchasing a property in Manchester. Or take a look at our opportunities that have been through rigorous due diligence to meet the standards IP Global sets in order to invest our own funds alongside our clients in Manchester.

Will interest rates rise in 2022? Can I secure a mortgage if I'm self-employed? How has COVID-19 impacted lending? To gain insight on what to expect next year in the mortgage market, IP Global interviewed Rebecca Pickard of Liquid Expat. The Senior Mortgage Consultant answered the most frequently asked questions specific to bank and mortgage interest rates, the availability of expat products, and the ease of securing a mortgage in 2022.

1. Do you expect to see bank interest rates rising in 2022?

There have certainly been more 'hints' on rate rises in the last few weeks. The Monetary Policy Committee (MPC) voted against a rise in early November as they said there was "value" in waiting to see how the jobs market coped with the end of the furlough scheme. However, they have not ruled out a rise in December – they meet every six weeks (or eight times a year to be accurate) and whilst no date has been marked for a rate rise, there does seem to be more indicators that a rate rise could happen at any time now due to a surge in inflation. It has to be reminded that there has never been a period in history whereby the BOE and mortgage finance interest rates has ever been this low.

2. Do you expect to see more or fewer products available to expats in the next 2/3 years?

Over the past three years, there has been a constant increase in expat products on the market, and I see no reason for this to change – an increasing number of lenders are becoming more comfortable in the space and are offering a broader selection to applicants living overseas. Over this period, this has resulted in higher loan to values being available to apply for, lower interest rates and more wide-ranging lending criteria for British Expats and Foreign Nationals.

3. Is it harder to get a mortgage buying via a company even if I’m the sole director?

No, the application process is very similar, so it’s no harder to obtain the mortgage versus purchasing in a personal capacity – not all lenders will lend to an LTD company structure, so it’s just about knowing which providers are able to assist, but that is where LEM come in. It is always prudent to get independent tax advice on the positives and negatives of obtaining mortgage finance inside an Ltd company versus in your personal name.

4. Can I get a mortgage if self-employed?

Yes, absolutely, albeit the number of lenders willing to accept is smaller versus someone on a full time employed position. One reason for certain lenders not accepting self-employed applications is the additional lender and underwriter resources required to clarify their actual self-employed earnings. If you are self-employed, the more independent verification of your earnings/company profitability via an accountant the lender can obtain, the simpler the process will be with any lender.

5. If I own other UK property already is this a help or hindrance to getting another mortgage?

It can be a help as some providers would prefer applicants to have landlord experience or a history of making mortgage payments in the UK. That being said, we work with plenty of lenders who can help first-time buyers. The finance options that are available to first-time landlords/buyers often offer very reasonable rates and terms.

6. Where do I find the cheapest mortgage?

You speak to Liquid Expat (LEM), we have the most extensive panel of Lenders, and these include UK High Street Banks and Buildings Societies, UK Private Banks and Lenders that are based offshore. We have exclusive products/fees with a range of providers and so can help clients obtain the best possible product for them with many of the products not available either directly to the public or through other brokers.

7. How do I choose whether to pick a 2/3/5-year tracker or fixed rate? What’s the difference?

Again, that is what LEM is for; we can help establish the best product for each client based on their individual circumstances – lots of things can impact the decision; the rate itself, if a client will relocate to the UK in the future, future plans with the property etc.

A tracker mortgage is a variable mortgage linked to the Bank of England base rate. Typically lenders will apply a certain % over above this, i.e. 2.89% + Bank of England base rate. The Bank of England’s base rate can fluctuate – it is currently 0.1%. Therefore your mortgage rate would increase if the external Bank of England base rate goes up; this leaves a level of uncertainty for borrowers. If interest rates go up, the amount they will need to pay on their mortgage could increase to an unaffordable level.

A fixed-rate mortgage has a fixed rate of interest for an agreed period of time during the mortgage term, i.e. a 2/3/5 year period. Some homeowners prefer the predictability of knowing that their rate is secure with a fixed mortgage, as this means that the amount they pay on their mortgage will stay the same throughout. This can result in some people paying more on their mortgage than if they had opted for a tracker mortgage, but this is not always the case.

There are also options for taking finance whereby you can obtain the security of having a fixed rate product without any early repayment charges for paying off the whole of the finance inside this period without incurring any penalty whatsoever. This is often attractive to someone who wishes to take advantage of both the five years fixed rate security but having the option to sell or refinance the property within this term and incurring no penalty costs. 

There is great news for UK property owners. According to Zoopla’s latest data, £4.6 million worth of privately-held property has increased by more than the average UK salary (£30,500) in the past year alone.

 

Why is this happening?

Stamp Duty Holiday

A major factor spurring on house price growth has been the stamp duty holiday. Creating a window of opportunity for first time buyers, it has provided those who previously had trouble saving enough for a deposit, to finally step on the property ladder. The scheme has also generated increased demand from both local and international investors, who can save between 2% and 5% in stamp duty on a purchase price up to GBP500,000.

 

Pandemic-Driven Lifestyle Changes

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With flexi-work and work-from-home policies becoming the new norm for many, buyers are looking for more space and a different lifestyle. As a result, rural and coastal areas in the UK have proven particularly popular for relocations, as homeowners are valuing more scenic destinations and time spent outside in nature.

 

Hundreds of thousands of households have made this move over the last year, with such high activity significantly reducing the number of homes for sale. This has led to house prices rising by an average of 8% in the year 2020 despite the pandemic.

 

Where is this happening?

 

Commuter Towns

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Commuter towns have seen a significant price increase, with some towns such as Mole Valley, Surrey, having over half the homes grow in value by more than the area’s average salary. Other impressive performers were St Albans, Hertfordshire with 46% of homes seeing the sizeable increase, and both Sevenoaks in Kent, and Bromley, South East London with 45%.

 

The Regional Picture

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Southwest and Southeast of England

The southwest has led the increase, with 29% of properties in the region growing in value more than the average local salary. It is closely followed by the southeast, where house prices have grown by an impressive 28%.

 

London

London followed suit. Despite the fact that salaries in the capital are the highest in the UK, at an average of £37,300, nearly a quarter of London homes (24%) have grown in value by more than the local salary during the past year.

 

Northern Regions

With an overall lower average value of property than many other parts of the UK, the monetary gains in the northern regions have been lower too. However, percentage-wise, strong price growth has been seen with one-fifth of these properties growing in value more than the local salary.

 

What does this mean for investors?

Given the performance of the UK housing market, there’s never been a better opportunity to choose property as a passive income generator. The above factors have contributed to soaring house price growth but the underlying foundations of the UK investment case are robust. Property investors are reaping the rewards and will continue to do so in the foreseeable future according to recent Oxford Economics data.

With the population increasing by over 6.2 million people in the last 20 years, the construction sector has struggled to keep up with increased demand for housing. In fact, recent estimates suggest the UK housing market deficit increased by over 380,000 units between 2015 and 2019 alone. Combined with a well-diversified and resilient economic environment, house prices in the UK increased by an average of 167% over the last 20 years.

However, the erosion in the number of properties for sale on the market also leads to an erosion in the quality of investment opportunities. Therefore, possessing the knowledge and skill to identify high quality investment opportunities has never been more crucial.

If you’d like to learn more about intelligently investing in this climate, book a free strategy session below with one of IP Global’s Wealth Managers in your region.

1. What is stamp duty?

Stamp Duty Land Tax (SDLT) is a progressive tax paid when purchasing leasehold, freehold or shared ownership real estate over £125,000 in England, Northern Ireland and Wales. In Scotland, it is called Land and Buildings Transaction Tax (LBTT).

2. Who pays stamp duty tax?

Everyone who purchases a property in the UK – whether residential or non-residential – pays Stamp Duty Land Tax. This includes corporate bodies, overseas citizens and non-natural persons.

3. What is the stamp duty holiday?

The stamp duty holiday was announced on the 8th of July 2020 to support the housing market amidst COVID-19 and Brexit discussions. It is a temporary reduction in the rate of stamp duty payable on a progressive scale. Some buyers can save up to £15,000 in stamp duty by purchasing a property before the holiday ends. The holiday will be phased out starting from 1 July 2021.

4. Does stamp duty tax apply on exchange or completion?
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Stamp duty applies from the completion of a property purchase. Regardless of when you exchanged contracts, if you complete your purchase between 8 July 2020 and the end of the stamp duty holiday, you will be able to take advantage of the change. 

5. How much will stamp duty tax be in 2021?

The stamp duty holiday stipulates that first-time buyers will pay zero stamp duty on properties up to the value of GBP500,000. The threshold for zero stamp duty will be reduced to GBP250,000 from 1 July and reach pre-holiday rates at the original GBP125,000 threshold by 1 October. However, buy-to-let and second-home buyers receive a 3% surcharge and thus the calculations for stamp duty payable based on property value bands can be further explained in the table below.

UK Stamp Duty 2021

6. Will the UK stamp duty holiday be extended?

Initially, the stamp duty holiday was set to end in April 2021. However, in the budget address on March 3rd, an extension was announced. A phase-out approach will be used, with periodic surcharges, until the stamp duty is back to original rates in October 2021. No further news has been released about another extension and with UK house prices soaring due to increased demand, it is unlikely to occur.

7. When is stamp duty tax paid?

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Stamp duty is payable to HM Revenue & Customs (HMRC) 14 days from the date of completion, otherwise, late penalties apply. At IP Global, your solicitor will take care of this and make sure the deadline isn’t missed.

8. How do I reduce stamp duty tax?

Stamp duty tax is only payable on your property’s permanent building fixtures. This means that if you have removable fixtures and fittings – such as fridges, sofas, freestanding wardrobes, curtains and carpets – they are not subject to the SDLT tax. You can therefore subtract these items from the total property price.

9. Who is exempt from stamp duty land tax?

There are several exceptions to when you need to pay SDLT. You may not have to pay SDLT if you are purchasing your first home, although you will still need to submit a return. However, you do not have to pay SDLT or file a return if property is left to you in a will, or is transferred to you because of a divorce. Also, SDLT does not apply to freehold properties bought for less than £40,000.

Finally, SDLT exemptions also apply if you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000; or if you buy a new or assigned lease of shorter than 7 years, as long as the amount you pay is less than the residential or non-residential SDLT threshold.

10. Will house prices fall after the stamp duty holiday?
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The phase-out approach could mean that property prices continue to rise between July and the end of September 2021. In the long term, it is likely that property prices will stabilize as sales slow down after the holiday.
For more information, or to find out about our investment opportunities benefiting from a significant stamp duty saving, contact us now.  

Birmingham’s establishment dates to the 12th century within the historic county of the West Midlands. The city has come a long way, playing an integral part in the British industrial revolution which laid the foundations for its title as the UK’s Second City.

Today, the city’s young and well-educated talent pool combined with Birmingham’s broad economic base provides a solid foundation for the future growth of the city. In fact, Forbes ranked Birmingham 2nd in the UK for new business start-ups in 2020.

Underpinned by strong career prospects and a vibrant, young atmosphere, its no surprise that the working age population has grown 20% in the last 20 years -almost double the UK average. Lets take a look at some of the key locations and hidden gems within the city attracting the most attention from buy-to-let investors and renters alike.

JEWELLERY QUARTER

Galliard-HomesIf authenticity and history are your thing, this area is definitely worth a look. Described by English Heritage as ‘a national treasure’, it dates back more than 250 years, when jewellers flocked to the area. These days, 40% of the UK’s jewellery is still made here – so an artisanal feel remains. The area has attracted the arts, media and creative industries, along with a strong cohort of professional service providers, bringing with it a trendy Food & Beverage scene.

St. Paul’s Quarter will receive a GBP125 million upgrade on almost 100,000 sq. ft of commercial, retail and leisure space nestled between the buzzing Jewellery Quarter and the city centre. The restoration plan proposes to create 305 new homes and additional mixed-use space across 20 buildings while delicately maintaining the urban grain and historic charm of this heritage site.

Who lives there?

The area is home to Birmingham’s last remaining Georgian square and lovingly restored townhouses. Expect to see established professionals who appreciate the old school charm of beautiful refurbishments, attracted by the eclectic food an beverage scene with an urban village feel.

Take a look at our recently completed development, Bishton Fletcher Building, in the Jewellery Quarter.

DIGBETH

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As a city, Birmingham has exciting property investment prospects, especially when looking at the regeneration of the East side.

Characterised by street art and red-brick housing, Digbeth has been likened to the trendy district of Shoreditch in London. Its convenient location is a huge draw for hipsters, creatives, and savvy businessmen alike. Just 10 minutes on foot from the city centre, Digbeth is growing in popularity as transport routes improve. 

‘The Custard Factory’ is Digbeth’s real estate focal point. A refurbished factory that houses 101 creative industries bound by art galleries, cafes, and dance studios. 

Who lives there? 

Its convenient location is a huge draw in for trendy creatives and savvy businessmen alike. Just 10 minutes on foot from the city centre, the area is estimated to explode in popularity as transport routes improve efficiency.

CHINESE QUARTER

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With a landmark pagoda at its heart, this fresh and vibrant quarter is a hive of restaurants, cafes, street food and some of Birmingham’s hippest nightspots. It lies within the city centre’s Southside; an area that has benefitted hugely from rejuvenation over the last few years.

With Birmingham Old Rep Theatre, Royal Ballet, the O2 Academy and Birmingham Hippodrome all within easy reach, it is certainly a key cultural hub.

Who lives there?  

Chinatown and the wider Southside is in especially high demand with young professionals looking to tap into a vibrant atmosphere.

EASTSIDE

HS2 is a big deal for Birmingham; not least because it will reduce travel times to London to just 49 minutes and will significantly cut journey times to Edinburgh, Newcastle and Manchester. Eastside’s Curzon Park is set to be the home of the new High Speed Rail terminus. Soon, however, the canal regeneration ‘Eastside Locks’ will command significant attention. The GBP450 million investment aims to create 16,000 new jobs and mixed-use floor space on 13-acres of prime Digbeth real estate.

Curzon Park along with nearby City Park Gate are home to some impressive new mixed use developments, while Birmingham City University has its very own Birmingham Institute of Art & Design in the area.

Who lives there?

It is easy to envision Eastside becoming a go-to location for people looking for inter-city connectivity. What’s more, the new GBP11.75 million City Park is the city’s newest urban park, earmarking Eastside as a desirable destination for young families.

GUN QUARTER

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Situated to the north of the city centre, this was for many years a centre of the world’s gun-manufacturing industry. These days the guns are gone, but the area remains a focus for small scale engineering and commerce.

Who lives there? 

The area is just a short walk from both Birmingham City University and Aston University, making this an up-and-coming destination for students.

WESTSIDE

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Here, sympathetically restored Victorian commercial premises co-exist with bold new living and working complexes. Paradise Square is a prime example: a planned ten-building development comprising commercial, civic, retail, leisure and hotel space. Already well-established in the area is the prestigious Queen’s College Chambers Building. Dating back to 1828, the original block started life as accommodation for medical students. The magnificent facade it is still there – and behind it are some of the hottest apartments in the city.

Westside’s canalside Brindleyplace is a hotspot for urbanites from across the city. Grab a meal, enjoy comedy or music, make a special trip for the Dragonboat or film festivals: this is what waterside living is all about.

Who lives there?

As well as professionals, don’t be surprised to run into Premiership footballers. When one of the prime Queen’s College Chambers penthouses hit the market a couple of years ago, players from Aston Villa and West Brom apparently went head-to-head to get a hold of it.


Find out more 

How does Birmingham stack up against other top cities worldwide? Speak with IP Global today to find the ideal property investment opportunity to match your portfolio.

Why You Should Invest In Commuter Town Property Near London
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2021 has been a year of uncertainty for many prospective homeowners – but there is always opportunity in crises. After three successive lockdowns and in the midst of a largely successful vaccination programme, the effects of Covid-19 on the UK property market are beginning to materialise. Now more than ever, renters, homeowners, and buy-to-let property investors are looking further afield than “prime” London property as commuter towns become much more appealing property choices. These effects are so pronounced that while rental prices of prime London property fell by 8.6% y-o-y, commuter zone prices rose 5.4% over the same period.

At IP Global’s virtual round table event of over 400 registrants, investors echoed this trend: almost a quarter would now consider investing in commuter town property rather than prime city-centre locations. The underlying cause for this is undoubtedly pandemic driven. However, there is significant evidence suggesting that changes are more than just short-term fluctuations and point to a massive shift in lifestyles after lockdown. With London’s economy accounting for almost a quarter of the Nation’s GDP, it’s hardly a surprise that the commuter town property near the Capital is drawing most investor interest.

 

Covid-19 has impacted rental decisions

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One of the most pronounced impacts of the pandemic has been the way we work. By April 2020, 46.6% of workers in the UK transitioned to a work-from-home routine at least temporarily – 86% of which was a direct result of Covid-19. Many businesses intend to make these routine changes permanent, and, together with the effects of several lockdowns, the appetite for property in key central business districts is dwindling. Instead, people are starting to look for property in commuter belt towns and nearby areas where rent and property prices are cheaper, and space is abundant. Rents in prime areas fell by an average of 1.3% in only the third quarter of 2020, while commuter zone prices instead rose by 1.2%.

 

Property prices are rising the most in commuter belt areas

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As the pandemic swept through the UK, a “halo effect” has emerged with property prices. As growth started to slow in the centre of the UK’s capital city, it steadily increased in most commuter belt towns. According to the Office for National Statistics, property prices in London grew by only 4.6% in the 12-month period ending February 2021. This is significantly lower than the 8.9% annual price growth across England, let alone commuter belt areas like Broxbourne where prices rose upwards of 11.0%. Unsurprisingly, commuter towns like High Wycombe, Peterborough, St. Albans and many more are gaining a significant level of interest from buy-to-let property investors, renters, and homeowners alike. So why exactly is the commuter zone suddenly getting all this extra attention?

Commuter town properties are more spacious

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Without there being a necessity to live in the prime areas of London, commuter zone properties have piqued the interest of many more. For those who have fully or at least partially transitioned into a work-from-home lifestyle, space both inside and outside the home is essential. Commuter town properties offer just this: the further out from the centre of London you travel, the more space you will get for your money.

 

Commuter belt towns are more affordable

Another advantage of commuter belt towns is that they are, in general, more affordable than property in London itself. Some of the top commuter towns like Cheshunt, Waltham Cross, and High Wycombe have average property prices of £384,248, £390,612, and £331,092, respectively.

 

Changes are likely to stay for the foreseeable future

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There is a substantial argument that the “halo effect” of property prices is here to stay. With routine changes like work-from-home policies proving effective, many of the fears that prevented them from happening long before the pandemic have been dispelled. This is not only echoed in the UK but all over the world where people have had to push the boundaries of technology and find that, actually, most office work-related activities can be performed and measured remotely.

 

As more concrete work-from-home and flexi-work policies are adopted across industries, real estate in commuter zones is becoming an ideal buy-to-let investor’s market with strong rental and capital growth prospects. In fact, homes are letting up to 30% faster when compared to pre-Covid-19 times, making them a great choice for prospective property investors.

 

Final thoughts…

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With more and more of London’s workforce exploring the city’s outer reaches for more spacious and affordable property, prices are bound to increase. Data has already begun to evidence this trend, suggesting that those looking to invest in property should get in on this market before prices settle at a new, higher norm.

 

If you have any questions about property investment in the UK, do not hesitate to leave us a message or catch up on the property latest news and insights here.

Think you know the basics of property investment? Think again.

Here are four common mistakes people make when starting out.

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Expectation: You need to buy a property that you would be willing to live in yourself.

Reality: You need to focus on the fundamentals and where you can make some money.

If you’re purchasing a buy-to-let investment, you won’t live there. Counterintuitively, often the best places to invest are not necessarily the nicest places. These are the areas undergoing regeneration and improvements to infrastructure, which will drive up value.

It can be difficult to decide to invest in areas that perhaps you yourself wouldn’t want to live in. But ultimately, you’re looking to the future and what it will be like then. When looking at some of the less-desirable areas that IP Global has invested in over the years, there’s no question that they have performed the best in terms of price growth. So, it is essential that you try to focus solely on the numbers and remember that this is purely an investment decision rather than a place you might end up living in.

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Expectation: It is better to buy in cash rather than to take out a loan.

Reality: Taking out a loan can increase your returns exponentially.

Many people are scared of the word ‘debt’. Regarding property investment, however, debt can increase your returns exponentially. Investors who take advantage of banks willing to structure loans at cheap rates are the ones who become truly wealthy building up leveraged property portfolios. Take a look at this example:

Investor A buys an apartment in cash worth £250,000.

Total Profit = £147,000

Return on Investment is 58.8%

Investor B invests in an apartment worth £250,000 but takes out a 70% mortgage. The split is therefore £75k : £175k Equity to Mortgage.

Total Profit = £75,000

Return on Investment is 100%

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Expectation: Yields are everything.

Reality: Your primary target can, and should be, a combination of both capital growth and cashflow.

Your rental yield is simply the annual rental return, calculated as a percentage of the property’s purchase price. Prime locations with high levels of demand and resultingly higher property prices will tend to have lower yields, compared to other less central locations. Yield is therefore often a reflection of risk, and lower-yielding prime markets are typically more secure.

However, there are other key factors to consider that make for a solid property investment. For example, a location experiencing strong population and economic growth, combined with an undersupplied housing market make a compelling case for investment.  Also, choosing a location with a low vacancy rate will ensure there’s no oversupply of rental properties on the market, this will keep void periods to a minimum and support rental growth.

So, at the end of the day, if you’re in it for the long run and your primary focus is capital growth while being relatively risk-averse, choose a property in an established high-demand location. However, if your focus is cashflow in the short term, yield plays a much greater role in your investment decision.

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Expectation: You need a substantial amount of equity upfront to invest in property.

Reality: There are ways to structure your investment plan so that you need less capital upfront.

Depending on the percentage of your investment you can get mortgaged (typically around 70%), you can drastically reduce the amount of equity to go ahead with your investment through joint-ownership. You have the option to invest with up to four people, which can reduce your equity required to as low as 5% of the property value.

If you’d like to find out about more property investment myths debunked, check out out our guide, 10 Crucial Truths About Property Investment.

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