UK Property Investing
An Overseas Perspective & Royal Week, Tel Aviv
Over the last week, members of the Residential Estates team have been visiting Tel Aviv to talk to the increasing numbers of Israeli investors who are turning to the UK property market to make their next moves. The event, called 'Royal Week', was hosted by Avi Idan and Naftali of www.t-nadlan.com
It has been an interesting experience. As a British business operating within Britain, it's often easy to take certain aspects of the market for granted, but talking with foreign investors is a great way to remind ourselves about some of the unique advantages afforded by UK property.
In Israel, for example, the buy-to-let landlord has been hit by government tax policies designed to limit the growth of the sector. That might sound like a familiar story to British investors but the conditions in Israeal are rather harsher than those in Britain. In the UK, the tax climate may be a little less hospitable than it was just a couple of years ago, but it is still substantially better than in many other developed nations.
Certainly, our experience has been that many Israeli investors greatly prefer the conditions in Britain, and not only for reasons of taxation. The Brexit vote prompted a fall in the value of sterling, which has since given them an important exchange rate advantage - making investments more affordable in absolute terms. There are also fewer bureaucratic hoops to jump through and, given the strength of rental demand in the UK, yields tend to be more predictable. What's more, the market has an impressive record of long term capital growth, so bricks and mortar typically make for a secure investment in an increasingly volatile world. Generally, rental demand is strong in Britain, but there are attractive niche markets, too. For example, the country has a thriving student accommodation sector, which is creating some very exciting opportunities in big university towns.
Likewise, an ageing population means that there are some equally appealing investments to be made in retirement-style properties. Demand growth at both ends of the age spectrum is adding to rental demand across the country.
Given the broader national decline in private property ownership, it's clear that the private rental sector has some very firm and durable foundations. Yields in some parts of the UK are also very appealing to foreign investors. The picture isn't uniform, of course; in London and many of the Home Counties, rental returns have been poor, and high average prices suggest they will remain unattractive for some time yet. However, look further north - to the Midlands, the North West, the North East and Scotland - and you'll discover many areas where affordable properties coincide with very robust rental demand. Yields here can often be excellent - far better than one would typically expect from savings accounts, government bonds or large portions of the stock market.
As a result, some new and recently developed properties are coming to the market with the added bonus of impressive rental assurances - investment packages that promise excellent returns for five or more years.
There are other attractions, too. At a time when the UK Government is struggling to find any consensus on the subject of Brexit, it may seem odd to cite political stability as one of the UK market's principal attractions, but to external observers, Britain remains a very safe bet.
Yes, Brexit is making big headlines, but there is nothing happening that is threatening the basis of our democracy or the rule of law. Britain does not witness the kinds of public sector corruption that infect many other countries and it still ranks as one of the most transparent and best regulated economies in the world.
For foreign investors, Britain remains an attractive proposition. The economy is essentially strong, inflation is under control and the Bank of England has reassured the world that there will be no radical changes in the base rate of lending. Despite the 'turmoil' of Brexit, no one seriously believes that the country will suddenly cease to be a significant contributor to the world economy. These are certainly the sorts of statements we have been hearing as we talk to Israeli and Middle Eastern investors. Such people are under no pressure to invest in British property - they have a whole world of opportunity to choose from - but they turn to the UK nonetheless. That's because they believe in the underlying strength of the market - the resilience of demand, the proven track record of capital growth, the country's political stability and so forth - and as a result, they regard UK property as one of the most potentially rewarding markets in the world.
Naturally, we're always happy to help overseas investors to find suitable investment properties in Britain but, equally, we're always keen to remind British nationals that they have some great opportunities right on their own doorsteps.
As a country, we can sometimes be blind to our own strengths. The factors that make Britain's buy-to-let market attractive to others are every bit as relevant to domestic investors.
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