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Sanjit Dhanjal.

Property investment vs stocks and shares

One of the major questions that investors face is what they should put their money into in order to achieve the maximum possible returns. The most common conundrum is whether property or stocks and shares are the most favourable option. These are the two most well-known and accessible types of investment, and both have attractive characteristics which will appeal to different types of investors. Here, we will explain both and point out the positives and negatives. Property The UK property investment market is known around the world as an opportunity that is both profitable and stable. For many, property is a safe bet that offers the prospect of long-term returns in a simple format. When you purchase a property to rent out, you are doing so with the potential to earn two streams of income: capital appreciation and rental income. The former is the profit you make over the initial purchase price when you sell the property down the line; the latter is the steady monthly income you receive from tenants paying rent. This dual income stream is a major advantage of property investment – and the best part is that the ongoing supply and demand issue (known as the ‘housing crisis’ by many) means that there is little prospect of a slowdown in growth, and therefore profit, anytime soon. The UK Government estimates that as many as 345,000 homes are needed each year in the UK. However, the reality is that we are only building approximately 240,000 a year. That means that every 12 months sees the available supply drop even further, ensuring that demand, house prices and rents continue to increase. With this in mind, it is no surprise to see Savills predict that the average UK house price is set to increase a further 21.1% by 2025. Some areas such as the North West (28.8%) and the West Midlands (24.0%) will exceed that and see even more impressive growth – making property in Manchester and Birmingham even more desirable as an investment than ever before. This combination of profitability and stability is extremely rare and makes UK investment property a very strong choice for investors looking at reliable, long-term profits. This profitability can be magnified by investing off-plan and purchasing a property at a below-market rate which will instantly have earned significant capital appreciation upon completion. For more information about investing off-plan in the UK, get in touch with our team today by clicking here. Stocks and shares Investing in stocks and shares is an altogether more volatile prospect than property. While the potential rewards are high, the chances that you will get that reward are both unreliable and much lower. It is rare that you will be able to find a stock that grows enormously without taking a large risk. The two income streams available when investing in stocks and shares are capital gains (when you sell your shares) and dividends (which are when you receive a portion of a company’s profits relative to how many shares you have). Despite sharing this superficial similarity to property investment, investing in stocks and shares has some features which are quite different. A point in favour of stocks and shares is that a range of mobile phone apps and other small companies are now making it easier than ever to invest – though it should be noted that using a service like eToro or Acorns is unlikely to net you the big payouts. Likewise, it is possible to enter the world of stocks and shares at a much lower entry point than property. Buying a bundle of shares is not as expensive as buying a property. However, again it is worth noting that unless you are buying in bulk – and therefore putting a large amount of money in – it is highly unlikely that you will be able to make the enormous returns that are the main potential benefit of this type of investment. The third point to bear in mind about investing in stocks and shares is that they are nowhere near as reliable as investing in property. Whereas the property market is stable and demand is increasing year-on-year, the stock market is vulnerable to factors outside of your control. The most obvious recent example is the Covid-19 crisis. Whereas property continued to grow throughout it, and demand grew more than ever, it is estimated that more than £191bn was wiped off the FTSE 100 at the beginning of the crisis. Furthermore, many are predicting a tough period ahead for the stock market thanks to a global economy that remains uncertain – in stark contrast to the UK property market which common consensus agrees will continue to grow. Both the property market and the stocks and shares have their benefits but, overall, property investment is the way forward for most investors thanks to its reliability and the strong growth ahead of us. For more information about investing in UK property, get in touch today and speak to our expert team by clicking here.
Sanjit Dhanjal
12th October 2021

Why investing in property makes more sense than putting your money in the bank right now

In uncertain times it is natural to look for secure, stable ways to grow your money that don’t carry the same high risk as the stock market. For those looking to build and profit in a sensible manner, two of the most intriguing options are putting your money into a savings account or buying property. Using a savings account – i.e. investing with a bank – is a tried and tested investment method that is both predictable and reassuring. The many benefits of doing this include its ease, and the fact that many savings accounts allow you to access your money whenever and wherever you wish. There are exceptions such as locked ISAs which will not allow you to access your funds without meeting certain conditions, but on the whole, putting your money into a bank means that you can save for the future at the same time as having access to your money. Another notable benefit of putting your money in a bank is that it is one of the safest ways of investing and looking after your funds. Under the Financial Services Compensation Scheme, if a UK bank or building society that you save with goes bust, you are guaranteed to get back up to £85,000 of your savings. However, this does not mean it is risk-free, and the main danger of saving with the bank is that interest rates are so low they are barely keeping up with inflation, if at all. When it is noteworthy that a bank is offering a savings rate of 2%, it is a sign that this could be a major problem. While your money won’t go anywhere, its value is gradually being eroded if it is sat in a savings account as inflation goes up, and you will be falling behind. Furthermore, the Bank of England base rate is at 0.1% and set to remain so for the foreseeable future. Until that changes, it is unlikely that higher savings account rates will emerge – and even if they do, it is unlikely that they will go much higher. Compare and contrast this to UK property investment which offers many of the same benefits as putting your money in the bank, but with a whole range of additional positives. Much like savings accounts, UK property is a reliable investment option with a strong pedigree. Bricks and mortar is your classic tangible asset, and the ongoing supply issues in the UK (the ‘housing crisis’) ensure that your asset will be in demand for the long term. The UK simply is not building enough homes, and with the rate of housebuilding increasing by just 1% a year, this shows no signs of changing. This is far below what is needed to meet demand. The UK Government estimates that as many as 345,000 homes are needed each year in the UK – approximately 100,000 more than are being built every 12 months. As the gap between supply and demand widens, house prices continue to increase along with the capital gains that bring for investors. The latest house price growth data illustrate the scale of demand and the money to be made by investing in UK property. New figures from search engine giant Zoopla show that the average UK house price reached a record high of £235,000 in August 2021. This represents a growth of 6.1% over 2021 to date and is double the rate of growth seen in August 2020. When we focus in a bit, certain markets come into sharper relief as good bets for investors. Leading the way is Liverpool, with the city seeing 9.8% growth over 2021 so far, with Manchester not far behind on 8.1%. This backs up recent analysis from Savills which upgraded the residential forecast in the North West of England and predicted another 28.8% of growth in the region by 2025. Furthermore, the same Zoopla report shows that sales are being agreed at the fastest pace for at least five years and that the average home now sells within 30 days. It is clear to see that demand for housing is through the roof in the UK, and until supply catches up this situation will continue. Right now, it is undeniable that investing in property makes more sense than putting your money in the bank. The UK property market is a reliable long-term bet for investors, and the returns on offer are hugely more impressive than a traditional savings account. What’s more, all indications are that this state of affairs will continue far into the future and reward those who invest in UK property for many years to come. Looking for advice on the best places to invest in property? Contact our team today and find out about our latest opportunities as well as Opulent’s market-leading investment strategies by clicking here.
Sanjit Dhanjal
12th October 2021

How to build a better future for your kids through property investment

Securing your children’s future is one of the most important things any parent can do. One of the best ways to do that is by investing and creating a nest egg for them. The purpose of the investment may vary – the profits could be for university fees, a deposit for their first home or anything else – but the method and overall goal remains the same. Investing in order to achieve any of the above is by nature a long-term process, and that makes property the perfect option. High returns, impressive stability and a long-term outlook are what characterises this class of investment. By building a property portfolio you can give your children invaluable insurance against whatever may come in the future. Here are just some of the things to consider when investing in property to build a better future for your children: Have a solid, long-term plan More than any other type of investment, having a long-term plan is vital if you are investing in order to secure your children’s future in years or decades to come. Many property investors get into the market with the intention of capturing short-term capital appreciation and then exiting again once they have received their income. If you are trying to secure your children’s future through property investment, this tactic cannot be the only aspect of your strategy. Instead, we would urge you to focus on more than only capital appreciation – instead, make sure that you pay a lot of attention to rental yields as well. Your rental yield is the passive, monthly income that you will receive from a tenant in your property. Unlike capital appreciation, rental income is a steady, long-term source of funds that will allow you to pay off any mortgages you have and build up a nest egg – the ideal solution for your investment goals. At Opulent, we specialise in helping you develop multi-year investment strategies which are bespoke and suited to your specific needs. Find out more about how we can help you by getting in touch today >> Look for a property market where the fundamentals are sound If you are investing for the long term and want the best chance of stable, secure profits for many years to come, it pays to find the markets where the underlying fundamentals are in your favour and likely to remain that way far into the future. This means that you should look for places where there is a huge imbalance between supply and demand – this creates competition and demand which will keep pushing house prices upwards, and at the very least will maintain them at high levels to protect their value. For this reason, buying UK investment property is a smart move for anyone who wants to build a portfolio and secure their children’s future. The UK Government estimates that as many as 345,000 new homes are required in the UK every year on top of the existing housing stock as the bare minimum to meet demand. In reality, an average of just 240,000 homes are being built each year, which means that the gap between supply and demand continues to increase every 12 months. Furthermore, it is estimated that the pace of building is only increasing at 1% a year – ensuring that the present situation which is so favourable to investors has no end in sight. It is this sort of consideration that should be at the forefront of your mind as it creates the conditions that your plan needs in order to succeed. Gift the property to your children at the appropriate time In order to not load your children with Inheritance Tax – which will normally be set at 40% of the value of the asset – you should involve them in the property investment process at an early time you deem to be right. By gifting your property as a Gift Without Reservation, which means that you cannot benefit from the property after it is gifted, you can set up what is called a Potentially Exempt Transfer (PET). This means that if you survive for seven years after the gift, no Inheritance Tax is payable on the property at all, ensuring that you can pass the majority of the value of your asset onto your children. There will be Capital Gains Tax and Stamp Duty concerns if you use this method, but overall it is a good way of passing on your assets to your children in a way that avoids a large tax bill. An independent financial advisor can offer advice that suits your particular circumstances, and we would advise seeking one out if you are unsure. Investment is one of the best ways to provide a better future for your children, and UK property is perfectly suited to the kind of long-term plan that this goal requires. By investing in the UK property market, you can help your children through university, gift them a deposit for their first home and so much more. For advice and information on a long-term property investment strategy, get in touch with our experts today who will be more than happy to help you plan >>  
Sanjit Dhanjal
12th October 2021

What overseas investors need to know about investing in the UK

The UK is the world’s number one property investment market. Investors from around the world have enjoyed for many years the combination of high short- and long-term returns and a level of security that simply cannot be found anywhere else in the world. Whether you are looking to build a portfolio that will provide a secure income for many years, or are looking for more immediate capital appreciation, investing in UK property is the solution for you. To assist, we have put together a list of some of the most important things overseas investors need to know about investing in the UK. Get the right location The UK has a huge range of property market locations which all have their own characteristics. This is undoubtedly a strength of investing in the UK as it means that whatever your investment goals are, you will be able to find a property to suit. Examples of regional variations include entry prices, rental yields and capital appreciation prospects – but we recommend you don’t get bogged down. If you follow the basic rules of investment then you will find the right location for you naturally. The key, as always, is to work out where people are going and buy ahead of them – thereby making the most out of future demand and the fastest-rising house prices and rents. For example, the London Commuter Belt is a far better bet than Central London at the moment due to a population demographic change that is underway – the rise in home or remote working means that more people than ever are leaving the capital and moving to the outskirts which are more affordable and offer a different lifestyle. As such, Commuter Belt hotspots like Chatham, Uxbridge and Ashford are good bets for overseas property investors. Can I get a mortgage in the UK as an overseas investor? While many overseas investors prefer a cash purchase, there is also a huge range of mortgage products available which you can access even if you do not reside in the UK. While you are likely to need a larger than a standard deposit, it is possible to get mortgages fairly easily and this can allow you to grow your portfolio faster than if you rely purely on cash purchases. The documentation you will need to proceed with a mortgage in the UK as an overseas buyer include: Passport Proof of funds Proof of creditworthiness Anti-money laundering documentation A final thing to note is that mortgages for overseas buyers are generally not available on properties under the value of £150,000 – however, the average UK property price is now more than £267,000 according to Halifax, and it is unlikely that you will be able to find a premium investment property in the best markets for less than the £150,000 threshold. As with all mortgages, if you are unsure we would always recommend talking to an independent mortgage advisor. Our team can put you in touch with an expert – if you require one, please get in touch today by clicking here. Make sure you understand the property buying process The first step when buying a property in the UK is to pay a holding deposit to secure your reservation. This will normally be approximately £5,000 and the developer or agent will not be able to guarantee your purchase until this is paid. Following this, you will undertake the exchange of contracts. This process will normally need to be completed within 28 days of reservation and will involve the appointment of a solicitor who will confirm that the purchase is correct and that you can proceed safely. It is worth noting that if you are purchasing off-plan – before the property has been completed – then this exchange of contracts will normally require a further staged payment, the size of which varies. If you are buying an off-plan property, make sure that you are aware of the payment plan stages. The stages of exchange are as follows: The selling agent’s solicitors will send a contract to your solicitor You will then be able to ask questions, and your solicitor will raise any queries with the selling agent When you are satisfied, you will sign the contract and pay any monies due on exchange Following this, the purchase becomes legally binding As an overseas buyer, you will need to provide your solicitor with some information at this stage, including: Proof of address Certified ID Proof of funds Following this, you will have to pay the remaining funds at the appropriate time. For example, if you are buying off-plan then you may have a 10-day deadline following the completion of the property and the handover of keys. Ensure that you are clear on the details of this before proceeding with your initial reservation. We recommend that you consult with an independent financial advisor if you are unsure at any point or require additional advice before reserving a property. What are the tax considerations for overseas property investors in the UK? As an investor in UK property, you will have to pay tax at various points in the process. The most notable ones are: Income Tax – This is a compulsory tax paid on all of the rental returns you make from a property based in the UK. The rate goes from a basic 20% to a maximum of 45% depending on how much income to receive through the Non-Resident Landlord Scheme (see more below). If you do not reside in the UK, you will have to pay income tax at the rate in your home country. Stamp Duty – Stamp Duty Land Tax is a compulsory tax payable on all properties over £125,000. The amount of tax depends on the value of the property and increases on a sliding scale. As a foreign investor, you will be required to pay a 3% Stamp Duty surcharge on your purchase, though it is worth noting that this additional 3% is likely to be wiped out within a year by your profits. Capital Gains – This is a compulsory tax paid on the sale of your property and is based on how much profit you make over the original sales price. We recommend that you consult with an independent financial advisor if you are unsure at any point or require additional advice regarding taxation. Non-Resident Landlord Scheme The Non-Resident Landlord Scheme is how HMRC collects taxable income from landlords who spend most of their year (more than six months) living overseas. If you qualify for the scheme, you are required to sign up for it. Being part of the scheme means that landlords can receive their full rent without an immediate deduction of basic rate income tax. You are still obliged to pay this tax, but if you are signed up to the scheme you can do so through a self-assessment at a later date. If you are not part of the Non-Resident Landlord Scheme, you will have the basic rate of income tax (20%) deducted immediately from your rent. For more information about the Non-Resident Landlord Scheme, click here. The above is our list of the most important things that overseas landlords need to know before investing in UK property. For more information about becoming an overseas investor, contact our team today by clicking here and we will be more than happy to advise you on the best investment strategies >>
Sanjit Dhanjal
12th October 2021