Looking back 10 years, when I first stepped into property investment, and now I did not see any changes in the basics of why Property Investment is still a dependable income generation and preferred option for many in the United Kingdom.
Despite the Covid 19 pandemic and Brexit, the parameters for choosing property investment over others have not changed much, although it looks more optimistic. I thought of writing them down as I have tried to analyse the facts over and over.
Disclaimer: This should not be taken as investment advice of any sort.
1. You won’t need to be a sophisticated investor
Now compared to other options like investing in stock, cryptocurrency, etc., the basic ‘brick and mortar’ property investment won’t need you to be a sophisticated investor. If you are starting up, you just need to find a desirable property where someone can live. As long as you can manage a 25% deposit and if the lender is happy with the achievable rent, you can buy it without much hassle. There’s no need to spend hours of studying investment books or understand difficult algorithms to do it.
2. The government backs property investment
Think about it, are there any investment options available which are backed by a central government other than property? On 6 July, 2020 chancellor Rishi Sunak delivered the so-called ‘mini-budget’. As part of his announcement, a series of reforms were introduced as part of the government’s strategy to boost economic activity. The real estate market is a key driver of national productivity and growth. Recognising this, the chancellor announced the immediate introduction of a Stamp Duty Land Tax (SDLT) holiday.
3. The leverage - using other people’s money
This bottles down to where all the fun and games, buying property using a 25% mortgage allows you to use other people’s money. Now what is other people’s money? The 75% cost of the property you are buying which banks give you, is simply other people’s money. This leverage of your investment is not present in any other investment options. Think about that!
4. Being a island, the landmass is limited
The UK is a small island and geographically can’t extend it’s landmass by any means. There are thoughts that all Europeans will leave the UK, then who will live in the houses. Many may leave, however there is an acute shortage of labour in the UK and if you notice the activities of the home office, they are working very hard on the immigration system to fulfill the gap. New Immigration system
Even though birth- rate has fallen in the last couple of years, the population is growing. Where will all these people live?
- The current population of the U.K. in 2021 is 68,207,116, a 0.47% increase from 2020.
- The population of the U.K. in 2020 was 67,886,011, a 0.53% increase from 2019.
- The population of the U.K. in 2019 was 67,530,172, a 0.58% increase from 2018.
- The population of the U.K. in 2018 was 67,141,684, a 0.62% increase from 2017.
Source: macrotrends.net
5. Best use of time
Now this is a very much valuable point for me, personally. The working professionals or business owners are constrained by TIME. The last thing you would need is finishing your work and surely won’t need another work which worries you everyday. If you know the UK property price trends, then you can rest assured that your property price will grow and you won’t expect losing a big chunk of your money on someone’s tweet!
6. Everyone needs a roof over their head - rented or purchased
Now this gives me pleasure when I think that I can provide home to a family who can not afford to purchase their own. When I speak with my tenants, I feel they are thankful to me. The UK government has high ambition by providing many options for first time buyers, still there are many who have poor credit ratings, many work on very low salary and are still far from buying their own house. People like me buy old, unmaintained houses, shine them up and make affordable homes. The Private Rental Sector or private landlords is still a support function to UK housing, which no one can ignore.
- Author: Mr. Ranjan Majumdar, Co-Founder, Nestino Property Investments