With 2013 becoming a distant memory we find ourselves facing 2014 pondering the changes that will occur in the property market. Nick Carlile, Managing Director, Platinum Portfolio Builder (PPB), would like to share his predictions for the year ahead when considering UK Residential Property Investment
He focuses on the key issues that concern any investors or those contemplating a move into property, which are:
Price is always at the forefront of any investor’s mind and the subject which generates the most debate! Nicks predictions for this year are that prices in London will begin to slow down (albeit there will be some level of growth) and other areas around the UK will instead experience greater levels of growth.
Nick believes, that for the best investments in 2014 (which provide greater discounts, double digit yields and a good income) the best strategy is to focus further North on cities such as Leeds, Manchester, Liverpool and Sheffield, which are currently receiving high levels of investment.
Although in 2014 there will be more lenders and more competition available, banks will primarily focus on professional property investors as opposed to the “accidental landlords” (who will find it more difficult to secure funding). They are also more willing to work with investment companies such as PPB who offer profitable opportunities.
The Help to Buy scheme has encouraged government-funded lending and this alone has kick-started the UK property market. As lending begins to become more accessible, more people will enter the market, which will have a direct impact on prices.
Regulation will continue to cause great debate in 2014 as there looks set to be more changes to the benefit system. In reaction to this PPB have made a conscious decision to move away from tenants reliant on benefits, their aim is to attract higher-earning tenants to their properties.
In 2014 Nick predicts little change in interest rates, perhaps a slight rise at most (anything from ¼ of a percent to 1 percent). A significant increase is unlikely as Mark Carney (Governor of the Bank of England) stated earlier this year that interest rates would remain low until employment reached 7%, which at the time was believed to be 2015. Although this looks set to happen much earlier than expected Nick believes that interest rates will remain around 1.5% until the end of 2014.
Competition will continue to increase in 2014. The PPB business model has reacted to this change and moved away from the purchase of smaller individual properties where competition is higher and significant discounts more difficult to achieve. It is instead, focusing on larger block deals with an average purchase price of £250,000. For this level of investment it is possible to purchase six properties with a double-digit yield and a discount of around 25%.
What will work in 2014
What works in 2014 is the same strategy that will work at any time in property and that is the dull and boring. The safe the solid and the reliable, houses that people will always want to live in and will always want to rent.
Simple, single, safe AST properties where you can achieve great returns is my recommendation for 2014.