Diversify your Retirement Portfolio by Investing in the UK Property Market

The UK has had a long history of increasing property prices, and the UK property market is seen as one of the safest investments for global investors. Very few asset classes have shown the same level of consistent returns as UK property has over the past 20 years.

Moreover, in recent years, investors from #China, #India and throughout the world have flocked to the UK to enjoy the benefits of investing in the UK property market, creating further demand, and their appetite shows no sign of waning.

From the perspective of the expat investor, investing in #UK property is still one of the best investments you can make.

UK property investment will increase portfolio diversification

One of the key principles of building a strong and resilient investment portfolio is to ensure your portfolio is truly diversified.

Traditional investment portfolios comprised of stock and bond investments have had a very difficult year during 2022, with some global indices down more than 25%.?However, the UK property market has continued to show great resilience, even in the face of rising interest rates and geopolitical risk, such as the conflict in #Ukraine.

Structural problems in the UK property market

One of the unique features which makes UK property a great investment opportunity is the chronic long-term shortage of housing supply.??This is an inherent, long-term structural problem in the UK property market - demand vastly outstrips supply.

The UK population continues to grow at a steady pace, creating a constant demand in the long-term future for housing, but restrictive building regulations limit the quantity of housing can be built.

Thus, from a simple economic supply/demand perspective, UK real estate remains a solid long-term investment.?

Strong rental demand

Another key driver of the UK #property market is that a higher percentage of the population now rent their home.?Many potential buyers are priced out of the markets as a result of rising house prices and forced to rent.?An increasing number of people prefer the flexibility that renting affords them, resulting in a ready supply of tenants for newbuild properties, and ensuring a stable income for investors.

As a result, rental yields are still very strong and rising, with some new developments in property hotspots such as Manchester and Birmingham recording yields in excess of 10% per annum.

Increase your ROI through leverage

Another benefit of investing in the UK property market is that you can use leverage to maximise your return on investment (‘ROI’).

Let′s take an example to see how this works in practice.

You are interested in buying a new build apartment in Manchester which has a purchase price of ￡350,000.?As an expat you will be able to get a mortgage for 85% of the purchase price, ie ￡297,500.?So you will only need to fund the purchase with ￡52,500.

Rental yields will depend on the type of property and location, but for modern developments, the net yield is on average around 8%. ?The financing costs will vary but let′s assume a buy-to-let mortgage rate of 4%.

The net rental income will be ￡350,000* 0.08 = ￡28,000 per annum.

Financing costs will be ￡297,500* 0.04 = ￡11,900 per annum.

The net profit will therefore be ￡16,100 per annum. This represents a return of (16,100/52,500* 100), equating to a 31% ROI on the original capital invested.

Of course, these figures will vary depending on the property, and available financing, but clearly illustrate the benefits of a leveraged investment in UK property.

What type of property should I invest in?

Once you have made the decision to invest in the UK property market, the next decision is to how to go about purchasing a property which will offer you both capital appreciation and a strong rental yield.

We advise our international expat clients to invest in new build or off-plan developments.?There are several key reasons for this.?Firstly, modern new build developments will have a dedicated in-house property management company to ensure that as soon as the development is completed, the apartments can be rented out quickly and efficiently. This seamless handover from developer to the management company is a very attractive proposition for expat investors, who are not on the ground to manage their investment.

?A #newbuild property also removes the worries of having to deal with time consuming and costly maintenance issues. This offers expat investors peace of mind that their investment is running on autopilot, without the hassle of potentially costly maintenance or repair issues.

Another overlooked advantage of investing in a new build development in the UK property is that there will always be a high demand from overseas investors for high quality new build real estate projects.??

Overseas investors will not want the hassle and problems of maintaining and managing an older property – they will require a completely hands-free, fully managed property solution.??If and when the time comes that you want to sell your property, there will be a ready supply of potential buyers for your property.

Conclusion

The fundamentals of UK real estate investment remain as strong as ever.?Whilst there are some lingering concerns over geopolitical issues such as the war in Ukraine, and rising energy prices, the UK is still one of the most attractive locations for real estate investment, and a perfect addition to an expat retirement portfolio.

With house prices holding steady, and rental yields still increasing, an investment in UK property still remains one of the best investments available today, offering the expat investor a steady source of income and capital appreciation in times of financial uncertainty.