Brexit property investment myths – Dispelled

Brexit on the brain? You’re not alone. The UK's vote to leave the EU seems like a lifetime ago, but the ongoing uncertainty around if, when and how it will happen, is really putting the brakes on a lot of peoples' plans to invest in business opportunities, such a property.

Because of this, Platinum Property Partners (PPP) look at two of the most common Brexit property investments ‘myths’ and uncover some cold hard facts about why investing in property remains a great decision for many, deal or no deal.

Myth #1 - House prices will fall significantly

The Bank of England says that house prices could fall by up to 30% if we find ourselves in a ‘no deal’ situation. This is almost double the biggest drop experienced after the financial crisis (17%).

As a result, people are sitting on their hands waiting for some kind of windfall saving instead of buying now, which has slowed down property market activity. First-time buyers, home movers and new or inexperienced property investors are concerned that if they buy now, they’ll miss out on a cheaper deal in a few months.

Other property market experts, however, predict only small falls in house prices (5%), or even a 1% to 4% rise over the next year.

The truth is that, since the referendum, house price growth has fallen on average, not actual house prices when you look at the year-on-year figures (ONS House Price Index, February 2019). All predictions are of course based on an average for the UK, and actual data across the country proves that things can differ greatly between regions, towns and even neighbouring roads.

If you’re a first-time buyer, then you could hang around to see if your dream house goes down in price, but you risk missing out. If you’re a home mover, then any price drops are relative – if the house you want to buy goes down in price, the property you’re selling is likely to as well.

However, if you’re considering investing in residential buy-to-let property, whether for the first time or to grow an existing portfolio, think about the rental income you could be losing out on. The higher the rental income potential of the buy-to-let model, the less important saving a few thousand pounds on the purchase cost becomes.

Myth #2 – The buy-to-let boom is over

There has been a flurry of tax and regulatory changes impacting the private rented sector since 2015 which has resulted in almost 4,000 buy-to-let properties being sold by landlords each month (Ministry of Housing, Communities and Local Government).

As a result, buy-to-let lending has decreased significantly. Figures from the trade body, UK Finance suggest that the number of new buy-to-let mortgages approved in 2018 was less that 70,000 compared to 183,000 in 2007.

It is reported that rental yields are also low and that Brexit will only dampen tenant demand, especially from EU immigrants.

For single-tenancy buy-to-let landlords, it is true that margins are being squeezed and, in many instances, rental income barely covers costs. Such landlords are therefore leaving the market. But for high-income-producing models like the HMOs that PPP specialises in, return on investment remains 15% on average and there is actually less tenant mobility - meaning they are staying put for longer.

In addition, if you can pass the stringent stress tests, which HMOs can, attractive mortgage rates are being launched by lenders all the time in a bid to win new business. More products are also coming on the market for limited company buy-to-let mortgages

Succeed with the right support and the right property investment model

Property prices and capital growth become less significant when you invest in a buy-to-let model that generates up to 40% more income than standard buy-to-let. Holding off on your first purchase could mean you’re missing out on the opportunity to earn an income of more than £17,000 per property per year.

If you know what properties to buy and where (and how to cost-effectively turn them into high quality HMOs), and can position yourself as a serious investor who can move quickly, then investing in a buy-to-let property becomes less of a challenge.

With access to specialist and proven mortgage brokers to support you with the right finance structure, and a high quality but affordable home that more tenants are looking for, you can succeed in property investment despite the outcome of Brexit.

So, take your foot off the break and start your property investment journey! Download this webinar to see how you can replace a £65,000+ PAYE salary from just 3 properties and learn more about our tried, tested and proven business model here.