The UK property market offers investors a variety of options to invest in. With this in mind the question every investor should ask themselves is what are my investment goals and what strategy should I use to achieve this?
Investing in UK property can be a very lucrative proposition, and attracts investors from around the world. With multiple asset classes to choose from, including the traditional buy to let property, student accommodation, commercial and one of the latest high performing sectors — serviced accommodation, we explore what each can offer.
Take a city centre apartment as an example, in a growing city such as Manchester. This would be perfect fit for an investor looking for above average rental returns, in a city which is seeing a huge amount of inward investment and primed for growth.
When you’re considering the best type of property to invest in, think about what you require from an investment first. Price, the potential for capital growth, and the need for rental assurance among other key factors, should all be taken into account before you make an investment.
In this article, we will guide you through some popular asset classes available in the UK, which we hope will help you discover the best type of property to invest in.
Purpose built student accommodation (PBSA) in the UK is one of the safest investments you can make. There are over 2 million students in the country, and many can’t find suitable accommodation. It’s predicted that for every one unit, there are three students looking to rent the same unit for the academic year.
This number is expected to rise significantly in the coming years. By 2030, there will be an additional 135,000 students from England attending university. At the current rate PBSA is being built, there won’t be enough units available to accommodate the growing number of students.
Student accommodation is also an excellent choice for anyone who prefers a complete hands off, hassle free investment, as an experienced student management team will handle the day-to-day running of the building. This includes:
- Keeping the students happy
- Resolving any maintenance issues
- Providing you with regular reports
If your goal is to achieve high rental returns and a complete hands off investment, student accommodation could be the right choice for you, especially if you’re looking towards a comfortable retirement with alternative pension options.
The student sector has been one of the best performing asset classes for investors over the last 20 years, producing some of the highest rental returns. The shortage of property in this sector has seen a great demand and supply imbalance, creating returns of up to 10% Net, as students want to ensure they’re in the most suitable living environment.
PBSA is one of the best types of property to invest in if you’re looking for long-term ROI that comes with a low purchase price. For more information on this asset class, read our Ultimate Guide to Student Property Investment.
Buy to Let City Centre Apartments
A buy to let city centre apartment is one of the best type of property to invest in. They have always been a popular choice with young professionals looking for the fast-paced city centre lifestyle. Having social hotspots including bars, restaurants, gyms and plenty of shops on the doorstep appeals to this demographic, with many choosing to go out and socialise when they’re not working. With these amenities just minutes away, tenants will pay a premium for the convenience.
Part of this convenience also extends to not being rooted in one spot. The UK is shifting toward a more European way of living, and renting a property gives Britons a greater sense of freedom.
City centre property is also always highly popular, both on the rental and resale markets. Investors who are looking for secure, long-term rental yields and future opportunities for excellent capital growth should learn more about this category class.
However, as popular as buy to let city centre apartments are, towns just outside of cities are also proving to be smart choices for investors.
Properties on the fringe of the city appeal to young families. They need to be close to the centre for work purposes, but commuter areas provide a more suitable living environment for their children at a lower price point.
This lower price can also benefit investors. Properties outside of the city tend to come with more reasonable purchase costs, which is ideal if you are looking for more affordable investment options. Due to the low purchase price, it creates an opportunity to bring in higher rental returns.
Over recent years, serviced accommodation has quickly become one of the most sought after properties to invest in due to the attractive rental yields which can be achieved. According to JLL, a serviced accommodation apartment could bring in a yield as high as 10%, compared to the same property on a traditional AST agreement producing 5-6%.
The most successful properties in this category are based in the city centre. Normally, the tenants renting these types of properties will be professionals working in the city on a short-term basis. They’re looking for a home-from-home feel that hotels simply can’t provide, which means they’re willing to pay a premium for amenities such as:
- High speed internet
- A dedicated workspace
- Quality furniture and furnishings
- A fully equipped kitchen
Aside from business professionals, tourists will also look to rent serviced accommodation when visiting a city. Since tourists provide additional revenue, serviced accommodation properties in seaside towns, heritage sights and beauty spots could be an excellent alternative option for you.
Serviced accommodation can be a very lucrative strategy for property investors. In the UK, serviced accommodation is also known as Furnished Holiday Let (FHL), and in many cases, these are treated as businesses. There are different tax rules — which may or may not be of benefit to you — and the high turn around of tenants means an experienced serviced accommodation manager will be a key contributing factor to the success of this extremely popular and growing sector.
One of the major benefits to buying a property off-plan is that you can often complete the purchase below the property’s future market value. This creates a great opportunity if you’re looking for a higher percentage of capital growth, as the value of the property is likely to increase once it is fully constructed and furnished.
Buying off-plan also has a positive effect on rental yields. The lower the initial purchase cost, the higher your Net percentage will be.
While off-plan constructions are one of the best types of property to invest in when it comes to ROI, you need to be confident in the project’s success before making an investment. At this point, you should ask a professional property agent for their advice. They will conduct the necessary due diligence checks on the development and will report back on whether the project is worth investing in.
Make sure to read our full article on the importance of property investment agents for more information.
What is the Best Type of Property to Invest in?
As you can see, there are multiple types of property you can invest in, all providing some excellent value to investors. As with all investments, there are both positive and negatives to each, but in order to find out which one best suits you, we are always keen to consult with our clients and dig deep to really understand our investor’s goals.
The Treo Investments team prides itself on putting clients’ needs before anything else. If you’d like to speak with the team and work out a clear direction for your property portfolio, please reach out to us today, and we will be more than happy to have a chat.