Among the various types of investments that are available to the average investor, property and real estate are considered among the most secure and reliable investments. Real estate investments are rarely subject to huge crashes, and generally appreciate in value as the years pass.
Property investment has always been seen as a long-term game. It’s not uncommon to see returns on these investments come in after several years. Because of this, it becomes doubly important that investors pay attention to subtle changes in the market and other factors that could affect prices over that period of time.
Below, we’ve listed several factors that could affect property investments within the next five or so years. If you’re a potential investor, take a look below and see how these factors may affect your current or future plans.
Post-pandemic Markets
Major world events play a huge role in property and real estate markets. Perhaps the most notable event in recent years is the global pandemic. In a previous post on ‘How to Invest in a Post-pandemic World’, we discussed the effects Covid-19 could have on property investments and the rental market over the net few years.
The post-pandemic market marks a clear shift in terms of tenant priorities. For rental owners, tenants are demanding more space after stay at home mandates and national lockdowns. There has also been a slow but steady decline in the London market, with potential renters and homeowners looking to other locations such as Birmingham and the East Midlands.
Stamp Duty Changes
One of the things unique to the property in the UK is stamp duty land tax. Stamp duty is generally calculated according to the purchase price of your property. According to the International Tax Review, stamp duty can be subject to different permutations and rules, and this changing landscape can make it difficult for property investors to make decisions.
Stamp duty land tax can be a burden on property owners and investors. According to the current state of the UK market, it seems likely that SDLT may increase as time goes on. Be sure to factor any changes to stamp duty law into your plans before finalizing a property purchase.
Inflation
Another major factor that will affect property prices and investments over a longer period is inflation. AskMoney details in their guide to inflation and interest rates, inflation is generally good news for long term investments like property and stocks.
Inflation and interest tend to move in opposite directions, which is important to take note of if you’re planning on purchasing property within the next few years. Due to the effects of the global pandemic, inflation in the UK is predicted to rise to a ten year high of 4% or above by the end of 2021. The next steps on the part of lawmakers will be crucial, so potential investors should pay close attention to how the next year or two plays out.
Changing Demographics
Millennials are fast becoming the most significant demographic in terms of buying power. However, potential buying power doesn’t always materialize into actual home purchases. Bloomberg reports that prospective millennial homeowners are being outbid on the market, despite stamp tax holidays.
If this trend continues, it could mean higher demand for rental properties, rather than stand-alone homes. The high property prices also have an effect on where tenants are looking, with London’s famously high property pricing driving them, millennials are looking at nearby locations for alternatives. Taking note of the exodus patterns of this demographic could be particularly crucial as the post-pandemic markets solidify over the next few years.
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Daniel Peacock.