1. UK Interest rates are extremely low

The Bank of England base rate currently sits at 0.75%, there are more competitive buy-to-let lenders in the market than ever and at a time when investors are being forced to look at ways to achieve a higher rate of return than the rate of inflation – presently the 2% mark – so that their funds are not depleting in value daily. Given that mortgage debt is so low, this is a great opportunity for investors and landlords to re-finance their property portfolio, expand it by buying additional properties and also obtain a greater return in a strong rental market.

2. Capital Growth

People quite often say that UK property prices double in value every ten years. Although this isn’t an exact formula and calculation in all circumstances, property has definitely seen a rise for the last 5-10 years which these Northern Cities making big headlines;

1.    Birmingham Property Price Increases since 2013 of 36.8%

2.    Manchester Property Price Increases since 2013 of 33.6%

3.    Newcastle Property Price Increases since 2013 of 27.7%

4.    Liverpool Property Price Increases since 2013 of 23.5%

A house in Birmingham purchased at £200,000 in 2013 would therefore be worth £273,600 today (excl. purchase fee’s, taxes etc but to illustrate the level of growth).

3. Leverage

Leverage is utilising debt to finance the acquisition of an asset. In property, this is as a means of increasing the return on the equity that was invested by obtaining a buy-to-let mortgage. This is not something that can be done when investing in other asset classes such as when trading stocks and shares, when investing money in savings accounts or if you are relying on bank interest (which is extremely low at the moment). Leverage also enables property investors who are investing less money or who are looking at their first purchase to generate a greater return on investment (ROI) than via other investment options. 

4. Gearing

This follows on quite closely from leverage and the ability to ‘gear’ your portfolio is simply where an buy-to-let property investor, with an example amount of £100,000 available could either; 1) Purchase one property of £100,000 and invest all this money into the one property. Or 2) through gearing, the same £100,000 could be invested across the purchase of 4 buy-to-let properties by putting a deposit of £25,000 on each and utilising buy to let mortgages. (Again this excludes purchase fee’s, taxes etc but to illustrate the gearing concept).

Not only can an investor buy 4 properties, if the property prices increase in that area by 25%, one property via option 1) for £100,000 would now be worth £125,000. Via option 2) the 4 x properties would be worth £500,000 (4 x £125,000). Therefore gearing is a great way to increase the returns from multiple property investments.

5. Tangible/Physical asset

“Bricks and mortar” is a reference we have probably all heard a lot, and for good reason. Having a physical asset that is proven to be a strong investment has been advantageous for millions of people and over hundreds of years. When compared to stocks and shares, energy investments and the many other forms of investment available – there is just something very real and comforting about good old bricks and mortar. You know where your property is and you know it won’t go anywhere!

6. Opportunity to add value

With property there is the ability to refurbish it, re-design the layout, potentially add an extension or other feature that can increase it’s value, it’s returns or it’s appeal if you want to sell and exit. This is not something you can do with many other asset classes. For example, many people buy a property that requires work doing, or whilst it is ‘off-plan’ and being built. The work increases its value once the works is done. The investment ‘off-plan’ is worth more once it is built the next year. You may struggle to purchase other investments at a reduced price to make them better and resell them for a higher price or to retain equity within them.