Property investments have enjoyed long and solid popularity for one simple reason: they offer the stability new and inexperienced investors need. Indeed, being a physical and tangible asset, real estate ranks as an overwhelmingly secured and stable investment. While it’s not to say that the property market doesn’t experience any fluctuation — every market does — these drops and peaks in value are not comparable to the risks investors take when putting stock exchange or even cryptocurrency in their portfolios. Indeed, because people need a place to live, it’s fair to assume that real estate provides a safe way of investing your money in an item that will always be in demand. Ultimately, newcomers to the investment world can be reassured. It is highly unlikely for them to experience the horror of a total loss of their capital — while, on the contrary, stock exchange traders can lose it all.
However, despite the popularity of property investments, investors in the UK need to tread with extreme caution. The once profitable and stable investment strategy is going through a lot of unexpected and unpleasant changes. New property investors might want to look out for alternatives in times of political and economic uncertainty. Should you invest your hard-earned money in a new property today? The answer from experts in the UK is unanimously to wait. Now is not the right time to invest because the risks of high loss have increased dramatically. Here’s what you need to consider before you take any decision in 2019:
#1. Further regulations to hit landlords in 2019
2018 has brought a lot of regulatory changes that have had a significant impact on the profitability of rental properties in the United Kingdom. Indeed, old properties that didn’t meet the Minimum Energy Efficiency Standards — MEES for short — by 1st of April 2018 were not authorised to get out on the renting market. Countless landlords have been caught in the process of improving their Energy Performance Certificate ratings, leading to improvement and renovation projects. Landlords are allowed through the Rent Recognition Challenge to consult and record their tenants’ rent payment history. But now, tenants can also find records of criminal convictions and housing offences for their landlords. And finally, the overall tax relief is being reduced before it is removed by 2020. But just as landlords thought they had suffered enough, 2019 regulations are making it more difficult for them to manage their property income. Indeed, additional tenant fees — linked to a new lease — will be banned, letting landlords recoup their administrative costs through other means. They can’t count on using the deposit, though, as its amount will be capped to a maximum of 6 weeks’ rent.
#2. With Brexit uncertainty ahead, you want to stick to your money
If you’ve been following the news closely, you’ve probably noticed that every day brings new questions about Brexit. At a time where the British population is still unsure of whether the UK will leave the EU with or without a deal — or leave at all — you can’t expect to know how the economy of the country is going to react on 29th of March, 2019. Of course, there’s no denying that property investments are not a priority for the Government to sort out before the official Brexit date. But from the moment the country faces economic, legal, and political threats of an unknown nature, you can expect your property investments to suffer a hit. Indeed, the first rule of investing in a house or a flat is to take hidden costs into account. Brexit, however, threatens to increase these costs dramatically, whether you need to increase administrative fees or to take on new Brexit-inspired insurance coverage. Until you know exactly how much a house will cost you after March 2019, you’d be better off sticking to your money.
#3. Fair wear and tear can leave your property damaged
Things break. It’s part of the natural cycle in the property. While landlords have a right to deduct from the deposit the replacement cost of anything that has been damaged by the tenants, there is a level of expected wear and tear that you need to consider. Carpets, a preferred flooring solution, tend to suffer over the course of tenancy agreements. Indeed, stains, worn out patches in areas of high passage such as in the entryway, and damages where heavy furniture used to stand are to be expected and affect the value of your property — and the rental fees. Landlords need to invest in high-quality solutions such as Carrcrete polished concrete floors instead of carpet, to preserve the value of their properties. In other words, don’t pick cheap materials and solutions, if you want to benefit from your rental.
#4. Even if you can afford it, buying abroad is not recommended now
Holiday rentals and especially holiday homes abroad are a popular choice as they’re likely to boost your income. Indeed, the rental costs for a holiday home tend to be higher than in a long-term tenancy agreement. However, the dream of millions of Britons to buy overseas is threatened by the uncertainties of Brexit. Indeed, the sterling fluctuations have made houses abroad more expensive today than they were before the referendum in 2016. Additionally, even if you can afford to buy a property by the Med, there’s still a big question that is left unanswered for now; namely, whether or not Britons will see their free movement right inhibited. After all, what’s the point of buying abroad if you can never visit?
#5. First-time buyers need to do their research thoroughly
Lastly, first-time buyers need to tackle the current confusion that rules in the mortgage world. In the countdown before Brexit official date, you might find more attractive interest rates through brokers than via banking institutions. Additionally, the need to boost the British economy and to revive the property market might lead lenders to offer mortgages for 100 per cent of the property value — which could increase mortgage payments dramatically. In a word, don’t sign any mortgage agreement without doing your research across the lending market first.
From high and unexpected property costs to Brexit consequences, 2019 isn’t yet a year to invest in real estate for the British population. As the saying goes, we’ll have to wait and see.