3 Things To Know About The UK Real Estate Market


City, boat in water


Real estate properties in the United Kingdom (UK) are some of the most expensive ones in the global markets. In fact, market reports indicate that the cost of living in London is among the highest in the world (next only to Tokyo). A huge part of this is due to the high amounts of home mortgage amortization, or the rent middle-class workers have to pay for their homes.

If you're looking for good finds in the UK real estate market, you can check out the best areas to buy in London 2021 and other similar sites. But sometimes, there are pleasantly surprising real estate gems that you won't find on the internet, so it would also help if you go around and scour for good real estate deals.

Before you start, though, here are some of the things you should know about the UK real estate market:


1. Higher Values Don't Automatically Yield Higher Rents

If you're thinking of investing in England's real estate market, especially if you're thinking residential properties, one of the first realities you need to wrap your mind around is that higher property values won't necessarily translate into higher rents. Some investors have this assumed and unspoken belief at the back of their minds when they invest in property: they're going to invest in high-end, upmarket parts of London because these will rake in higher rents for them. But they're bound to be disappointed.

If you perform a little search test, you'll find out whether this assertion is true in the real world. You can go to property sites, for instance, and look up specific places in London. You'll be able to easily get the prices for high-end and upmarket houses. Then, you can compare this with the amount people are willing to pay for rent.

Additionally, there are sites where people post that they're searching for an apartment. Sometimes, they also post how much rent they're willing to pay. You may compare the selling prices of London properties and rents people are willing to pay with the figures of selling prices and rents in secondary cities and rural towns. Some resourceful investors are able to rent out old places for quite a sum of money. You'll realize there's not much difference in rents, which means you'll have lesser margins if you buy high-end projects.


2. North And South

Another thing you need to know, especially if you're a first-time investor, is that there's in England what can be called a North and South divide. In the United Kingdom, properties in the north and those located in the midlands and immediate surroundings have lesser prices than those found in other places. What's more important is that, historically, those in the north have also chalked up higher rental returns when compared to properties in the south.

Many investors eye London with a view to cashing in on the faster rate of capital appreciation. The idea, it seems, is to buy London properties now because their prices will go higher and faster. This is good for those who invest with the goal of selling their property after a couple of years. But other investors look for cash flow-they'd want to earn rental income while they own the property instead of waiting for the windfall after several years of speculating and waiting.

Still, the trend for others is to invest in Real Estate Investment Trusts (REITs). Even for those who aren't that concerned about cash flow but are more into how much they're going to make the moment they unload the property, it still makes sense to buy a property where the prices have bottomed out.

Prices are already quite high in booming places like London. Sometimes, the prices are way beyond their realistic fair market values (FMV) because of too much speculation among realtors and investors.


3. You Don't Have To Live There

Finally, there's this notion among first-time real estate investors, albeit unfounded, that you have to live in or near the place where you have or will be making real estate investments. The thought behind this, so goes the reasoning, is that any person who invests in real estate should know and understand the property market. But you should know that you don't have to be a resident of the place where you're going to buy or invest in real estate properties.

There's no such requirement in real estate that you should also live in the borough where you're going to buy real estate properties. If this were any true, no one would be able to take advantage of real estate opportunities in emerging urban centers and boomtowns.

What's advisable only is that you should invest in places that are relatively near to where you live or work. You should be able to drive to that place to get to know the place other than through the information and statistics you read from newspapers and real estate special reports.


water, island

Takeaway: Buying English Land

If you know how to find good deals, and you buy real estate properties in the right areas, real estate investment in UK properties can be very profitable. A sound piece of investment advice that can guide your work should be to 'buy low, and rent high.'

If you could find real estate properties being sold for significantly less than their fair market values, and you could rent them out for higher rental rates, then you could make some good money buying English land.