With a second national lockdown looming and no way out of the Covid-19 pandemic, it can feel as if there is nothing positive to come out of the health crisis. So you exercised more and ate better for six months. Big whoop! You’d rather leave the house without the fear of explaining your movements to the police!
Look, there’s no way to sugarcoat the current situation because it’s rubbish. However, as the saying goes, every cloud has a silver lining. You probably don’t see it right now, yet it exists in the form of real estate. Typically, property investment is the last thing on your mind when you’re locked down and quarantining, for obvious reasons, but the more you research the topic, the more you’ll spot the opportunities.
It goes without saying that you must understand the pros and cons before signing on the dotted line, and it’s essential to factor in your personal circumstances regarding work and job security. Yet, if you’re happy and want to try and turn the Coronavirus pandemic into something less negative, you can.
Here are the reasons why, and the methods you can leverage to take advantage of the housing opportunities currently available.
Interest rates haven’t been high for a while, but they’re about to get even lower. This is bad news for banks and great news for lenders who want to benefit from the relatively cheap loans on offer. Covid is holding back consumer spending, leading the Bank of England to say that negative interest rates might be the way forward.
What does this mean for you? If you’re in a position to borrow, it means the interest will be almost minimal, affecting the total you have to pay back. Anyone eligible for the best offers could end up with a deal where you essentially only have to return the funds you borrowed. This is almost unheard of since lenders make profits from interest rates.
By paying the loan back quickly, you can use a mortgage to fund a real estate purchase and find tenants who will cover the monthly repayments. The incredible thing about the current interest rates is that, even if they go back up, the money you can charge for rent hasn’t declined. Therefore, the trick is to save a chunk for a rainy day, i.e. higher premiums.
Still, you can combat this by fixing the interest rates for an extended period, such as ten years. Usually, this wouldn’t be possible, yet the situation at the moment is forcing creditors to agree to healthier terms for customers. Doesn’t the idea blow away the winter blues?!
Renovation Over Relocation
When you think of property, it’s tempting to jump the gun and check the buying market for the best houses. The average person moves eight times, so you could be due to move any time now! However, there’s no reason to bump up your fees in uncertain times, increasing your exposure.
It’s vital to remember that the average price of real estate in the UK is over £200,000. Plus, Barclays estimates the cost of moving at £8,000. As a result, you could be £250,000 in the hole by the time you’ve unpacked your belongings and got the lay of the land. Thankfully, a renovation is an attractive solution.
Under these circumstances, an extension comes in at £1,000 per square metre. Although this is a lot, you’ll save £225,000 if you stick to a strict budget and plan accordingly. £20,000 for an extension might sound like a lot, but it isn’t in the grand scheme of things as research shows the average extension project adds 23% of value to the listing price of a home.
Going off the average UK property value, this means you stand to make £20,000, or 100% profit. Those figures make investing in your current home well worth considering!
Global Exchange Rates
One of the benefits of being British is the strength of the pound. Regardless of Covid and Brexit, it’s the fourth most traded currency in the world, and one of the strongest right now. Other currencies aren’t as stable, which means you get more bang for your buck with international investment.
Singapore is a perfect example. As a rule, Singapore real estate is reliable as the country has favourable investment policies, so the demand is high. However, the drop in its exchange rate makes it an opportunity for Brits to invest since you’ll receive 1.8 SGD for every GBP. Therefore, you won’t need as much capital to take advantage.
Not only are low-interest rates inviting, but so are the regulations in Singapore. The Housing and Development Board has invested in high-quality, low-cost state-built housing, which means an HDB resale flat is already pretty affordable. Also, the fact a body regulates them with a great reputation only makes the process more comfortable as it removes potentially challenging obstacles.
Foreign property investment is no joke, but at the minute, it’s about cheap and profitable as it gets.
Flipping a property is always a smart move if you can secure a high resale price and make a quick profit. If you can’t, the other option is to rent. Landlords aren’t keen on long-term rents because it requires lots of time and effort, and the ROI might be high as a result. Plus, there’s the unpredictability of tenants.
For instance, there might not be enough of them to warrant rental rates, causing you to lose money on your investment. However, the demand for rental properties is very high, even during a global pandemic. Okay, rates are falling as you can’t expect struggling tenants to keep up with pre-Covid-19 prices.
Yet, your low-interest home loan should account for the reduction, while the increase in people that are searching for places to stay only results in a more reliable market. As such, the uncertainty isn’t as high, although you will need to be flexible as times are tough.
For those who can afford it, falling interest rates and increased rental demands are opportunities for investors.