What do headlines about Chinese investment in UK residential property mean for investors in the UK property market? The short answer is very little.
Almost all investors are running with the crowd whether they are Chinese or not. Any circles that the media choose to draw round the actions of one particular nationality are misleading at best. When trying to analyse your way through the sentiment of the media and the crowd it is often easy to lose track of the basic investment fundamentals.
Of course it comes down to what you are trying to achieve. Investing in residential property is always a good idea. Local knowledge is very important whether you have that yourself or you employ a suitable agent to work in partnership with you.
Capital Gain from residential property.
In the simple case where you are not a developer or builder, if you are looking for capital gain by buying low and selling high, chasing the next area of growth all around the country or world, then when doing this it is usually always difficult for income to contribute in any way to your investment. In this case income is often offset by expenses and hampered by low yield, although these days it has to be pretty low not to beat what you can get in the bank. Then there are costs of relocating to a new geographical area. Even if the investments are managed remotely the expenses of establishing new relationships with local services can be excessive when not spread over a long term.
Income from residential property.
If you are looking for Income over long term then the correct research can find you locations with very good yields, good enough not to be concerned with any gain in value the property is achieving. Many smart investors have figured out that if you are not selling a property then they are completely immune to fluctuations in value. Psychologically this is very difficult for some people to get their head round as they need the security of knowing that if they had to sell a property what price would they achieve. This is fair enough as it depends on why you have invested the money in the first place. The important fact is that in the case of a market collapse if a property has been bought to generate income at a certain yield then no matter what value the market puts on the property it is still ‘worth’ at least the original price paid by the investor to that investor because he is still getting the income that he paid for. Getting a fixed income is a very valuable thing, if you don’t believe that then go and ask a bank how much money they would want to pay you the same monthly amount. Over the very long term it is very unlikely that a property investment will lose value or reduce yield.
The normal investment in residential property.
The normal investor looks for a property that they think is an attractive asset and which pays a reasonable yield and by doing this they put themselves in the middle. Not achieving the headlining capital gains reported in the media and not receiving the optimum yield you can rarely have both, and sitting in the middle is a very safe place to be. Adopting any of these strategies comes at a cost and of course there are investors who do all three and the degrees in between.
Link to story:
http://www.bbc.co.uk/news/business-40640289
Featured photo by:
Ministerie van Buitenlandse Zaken