The UK Property Investment Renaissance
Anyone with a an interest in the UK property market will know that an abundance of legislative and tax measures have been imposed on the buy to let market in the past couple of years. The moves have been seen as part of an attempt by the government to dissuade small scale investors - including expats – from further stoking demand.
Most notably these changes include higher stamp duties, the phasing out of mortgage interest relief, and more stringent borrowing requirements. There are many consequences to these changes, but the bottom line is this: borrowing is more difficult and investors can wind up with portfolios that leave them out of pocket every month rather than give them a return on investment.
If you read the press you’d be forgiven for thinking that the boom days for investors are over. And it is true that some amateur investors have been scared away from the market, which perhaps they are right to do as property investing now requires more effort, planning and self-education. But as the host of the Inside Property Investing podcast I speak to investors and developers every week who are doing all these things. And I’ve noticed an entirely different response.
While no one wants to pay more tax or jump through additional bureaucratic hoops, a new breed of innovative property developers have reacted, not by resorting to elaborate tax avoidance schemes, but by raising their game with innovative new investment strategies and by providing new and better services to tenants. And in this series of monthly columns I’ll pass on some of the wisdom I’ve gained from speaking with them:
I’ll start by talking about how to maximize rental income. Contrary to what landlord bashers will tell you, higher costs cannot just be passed on to tenants. Market forces rule, and there is a limit to what people will pay. But what landlords can do is provide a better service that attracts tenants willing to pay for those enhancements. Some of my recent guests have been focusing on clever design, beautiful interiors and rethinking the meaning of micro-living and shared housing.
Take Martin Skinner as an example. With a background in technology startups, he’s not someone you’d immediately think of to understand the buying decisions of first time home owners. But as the founder of Inspired Asset Management, a group of property companies, he is creating some of the most desirable new homes in London.
Some of the most notable aspects of his developments are the clever uses of space in his office-to-residential conversions. For example, he’ll create one bedroom apartments that average 30 square metres, and two bedroom apartments that average 40 square metres, which is around half the size of a typical new build. He does this by ensuring maximum use of all available space, with innovations such as smart glass retractable walls and folding sofa-bed systems, which create more flexibility in how the future owners use their space.
Skinner is appealing to a very specific market with this concept. Young, metropolitan, first-time buyers cannot afford large apartments or houses. But they are accustomed a certain lifestyle and sociability, so his developments include communal club lounges, sky gardens, and concierge services.
This all helps to sustain his premium pricing model, resulting in him commanding 1.5 times the average price per square foot that other developers see across the capital. Demand is also high despite the slowdown of the London market.
As a self-proclaimed creative, Stuart Scott is perhaps a more obvious choice to spearhead a new movement in interior design thinking. He’s coupling his expertise from running an award-winning digital design agency with his long-standing passion for property investment. His focus is now on developing innovative spaces at Co Living Spaces.
By thinking of each new property as a product, and his future tenants as his customers, he is creating a bespoke offering in the HMO [house of multiple occupation] market. This was becoming a stagnant, copycat niche where ‘premium’ fit-outs rarely went beyond a bland IKEA-like makeover. And as with Martin Skinner, by doing what others aren’t, he’s able to command a premium price for his products.
Scott creates these unique developments by looking for inspiration outside the residential sector, particularly from areas where his ideal customer - young professionals - choose to spend their time. This includes restaurants, bars and coffee shops, and Scott looks at everything from how space is created to unique fixtures, fittings and finishing touches.
By creating accommodation that matches the style and vibe of his future tenants’ chosen hangouts, he becomes the obvious choice for them when they’re looking to upgrade their living arrangements.
These are just two examples of how property market is coming of age, in response to legislative changes. While the UK government seems to have its eye focussed on attacking the everyday investor, the innovators are surging ahead into an uncharted world of bespoke designs and increased profits, proving that it is always a good time to be investing in bricks and mortar as long as you lead the way rather than follow the herd.