Future landlords who do not want extra stamp duty are exploring alternative ways to invest in property and become part of the UK’s booming property market. In his Autumn Statement, Chancellor George Osborne announced that those buying a second home or buy-to-let will pay a higher stamp duty rate which is 3 per cent more than the ordinary rates. As a result, someone looking to invest in property or buy a home worth £250,000 will have to pay £7,500 more. Similarly, the cost of a buying home worth £15,000 will increase by £15,000. As the house prices continue to grow at the rate of 6 per cent a year, the property sector in Britain has become an attractive sector, with builders looking to invest in property on larger scales.
The sector is attracting an increasing number of investors who are seeing a number of advantages to invest in property sector. Investors willing to invest in property and putting more cash in the sector have choice of investment as they have a number of options to explore. Out of the vast opportunities to invest in property, the focus is on rented property. Most investment is channelled to offices and other business and commercial spaces. The majority of property fund is centred around retail space as well because the rentals are higher than ROI on other types of properties. In fact, merely a couple of property funds invest in properties such as residential and other related sectors.
Another attractive area to invest in property in the UK is student accommodation. Funds are directed towards the sector in large amounts as it has the potential and opportunity because of increasing number of students coming to study in reputed universities in pursuit of higher education. However, the office and rental space property investment opportunities have outperformed the residential investment opportunities. The Brandeaux Student Accommodation fund worth £1bn was suspended and then liquidated after it failed to sell properties and meet redemptions. It took two years for investors to get their money back. Firms such as Taylor Wimpey, Persimmon and Barrett will invest in property more and they are expected to perform as demand continues to outpace supply.
Laith Khalaf, an investment analyst at Hargreaves Lansdown, says, “Most of us have already borrowed large sums to gain exposure to this market through the house we live in”.
“The costs of buying, maintaining and administering residential properties are also high, which can erode returns.”
“Investors would by and large be better off sticking with traditional funds, and potentially even commercial property funds, which at least diversifies their money from the roof over their head.”
