Why you need to think twice before investing in UK property

When it comes to the topic of investments in the UK, properties are regarded as the Holy Grail.  They are regarded as a near guaranteed source of income and there is decent evidence to back this up. House prices have remained strong over the last few years with up to 10% growth noted year-on-year in some parts of the UK. However, with the current Brexit atmosphere now is the time to take a step back and reconsider investing into the UK property market. Here are some reasons why:

Possible Tax Changes

In 2015, Londoners were put through the hoops on the possibility of a mansion tax by Ed Miliband and Labour. The plan didn’t materialise but George Osbourne and the Conservatives introduced the 3% rise in stamp duty for people who already own a property. The stamp duty has been in effect since April 2016. With the current economic and political climate, there is no telling what the next tax policy would be, in the governments bid to cool the housing market. As a new landlord, will you be able to keep up with the additional expenses?

Possible Interest Rates Rise

Over the last decade, the UK and other developed economies around the world have maintained negative interest rates. Tracker mortgages will rise as soon as interest rates rise. As a potential landlord, therefore, you have to ascertain how your position can change in the event of an interest rate rise.

Property Management Difficulties

The rigours of managing a property push many into taking the costly route of using agents. Can you keep up with overwhelming nature of being a landlord? Can you afford to pay agents to manage your property? It’s important to remember that these kind of property management difficulties are what distract many people from entering the market themselves.

You Could Be Better Off Diversifying

In the money market, investors are advised against putting in hundreds of thousands of pounds in one stock. As a landlord, you will be putting in an average of £150,000 into one basket. Even if it all comes together and the current political climate doesn’t lead to a dearth of renters or buyers in future, your mortgage interest payments will eat deep into any incomes generated. How will you cope with years of working hard and hardly breaking even?

Selling is Difficult Now

It will take you 2-3 months to sell a house in the UK today. Even when you are deploying known measures for selling quickly, there is a chance that more property owners are looking to sell in your postcode.  It often ends in accepting a price lower than the actual value of the property.  In contrast, an investor in the money market can sell off their portfolio within any working day, in minutes.  There will always be buyers waiting.  As a new landlord, can you cope with the prospects of not being able to free up cash when you need it without losing value?