Specialist property investments proving a popular alternative to buy-to-let.
Specialist property investments are a rapidly growing field in the UK. Recent changes to the traditional buy-to-let market; including a 3% increase in stamp duty on second homes and upcoming legislative changes which will limit landlords’ tax relief, are decreasing the market's attractiveness, and shifting investor’s focus towards alternate investment opportunities.
In recent years specialist property such as hotels, student accommodation and care homes have all experienced considerable increases in private investment, as the line between ‘niche’ and ‘mainstream’ investment becomes increasingly blurred. In 2015 specialist property accounted for 18% of all commercial property investment transactions in the UK, and official forecasts suggest that this will increase by 10% to reach £14.3billion by the end of 2016.
The care sector, while seeing an almost crippling decrease in public funding in the past decade, has also received a substantial increase in private investment. According to CBRE UK, in 2014 the UK care sector received over £4.5billion worth of investment.
These increases have been ongoing for many years. In 2010, student property received around £1billion of investment; yet by 2015 this figure had risen to almost £6billion, as increasing numbers of students and an evident shift in expectations rapidly increased demand for quality student accommodation.
Why invest in specialist property?
Alternative property investments offer investors a variety of unique benefits not available within the traditional buy-to-let market.
Firstly, these investments often require significantly lower cash input than traditional buy-to-let property. According to figures from the UK Land Registry the average UK house price is just over £200,000, while Select Portfolio has care home investments available from just £58,500, hotel room investments from just £55,000 and student accommodation investments from just £39,995.
Secondly, these properties are able to offer investors some of the highest yearly returns of any UK asset class. Investors typically receive yields of 7-10% per annum; extremely impressive considering that returns in the traditional buy-to-let market max out at around 6%.
Thirdly, because properties in these sectors are typically managed and maintained by specialist operators, investors receive completely passive, hands-off returns. The operator assumes full responsibility for the management and maintenance of the property through a unique leaseback model, meaning investors’ capital outlay is significantly reduced.
Returns are frequently assured by the operator, based on the extremely stable demand sources that these sectors benefit from. While students traveling from all over the world to study in the UK increase demand for purpose-built student accommodation; a cultural shift towards ‘staycations’ is increasing demand for UK hotels; and the country’s ageing demographic is set to provide an unwavering demand for quality care services.
An added attraction of investing in hotels and care homes is that investments of up to £150,000 are stamp-duty exempt. This leaves investor not only free from the 3% buy-to-let increase, but also free from stamp duty charges altogether when their total investment adds up to less than £150,000.
With all of these benefits, it is easy to see why property investors are increasingly shifting their portfolios towards the UK’s specialist property markets. If you’re considering investment in one of these highly lucrative sectors contact a member of our team today on +44 (0)1202 765011 or email [email protected] for more information on our available opportunities.