In this article, Solomon managing director Andrew Ward summarises the findings of our Quarterly Report and draws some conclusions about the likely impacts of recent changes upon the property investment market.
Multiple factors are conspiring to make 2016 a challenging year for investors, though some of these changes will create valuable new opportunities for those who aren’t overly reliant on borrowing.
Political intervention is likely to be one of the most powerful forces this year, as the government takes deliberate steps to slant the property market in favour of new home buyers. Increased taxation and other constraints will therefore force landlords to consider new ways of maintaining profit margins. Indeed, some industry associations are already describing a shift in investor interest: some expect to see a surge in property conversions – turning larger houses into high-yielding multiple occupancy properties – or a move towards more professional, higher rent-paying markets.
One of the most promising markets this year is widely predicted to be found in British cities that are performing well economically. New job opportunities and a growing disenchantment with overpriced property in the capital may well see affluent professionals moving out of London into other thriving areas. Here, investors can count on high rental values, substantially lower investment costs and, consequently, far superior yields.
Nevertheless, the devil is in the detail and with so much happening in the UK and worldwide, no one expects the coming year to be plain sailing. As of January 2016, China’s economy is faltering, world commodity prices are down and there is continuing tension in many parts of the developing world. The Chancellor has expressed the view that 2016 “is likely to be one of the toughest since the financial crisis” and that there remain big challenges for Britain’s economy.
Against this background, we expect property investors to take time this year to re-examine their portfolios and to pay particular attention to profitability and yield. This is not a time for complacency; market conditions are changing and investors need to change with them. Investment in bricks and mortar remains an excellent option for many but now, more than ever, it’s crucial to pick the right property, the right location, and the right financing package.
There are some very exciting opportunities in the market, particularly for those who don’t need to borrow heavily, but taking full advantage of them demands through research and a detailed, realistic understanding of one’s financial circumstances.
In short, whether you’re a new investor or a seasoned professional looking to rebalance your portfolio, now is a time to seek expert support.