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Does property make a good investment?

23rd February 2017

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A question that I am often asked is; “does property make a good investment rather than shares or savings?”. Clearly with savings rates at historic low levels and the stock market remaining volatile many investors look towards the perceived security of bricks and mortar.  2016 was a year of unexpected results.  Pollsters didn't predict Brexit or America voting for Trump and the market didn't either.  The prospects for the UK and regionally remain in my view positive.  Bricks and mortar, whether this is a house, shop or industrial unit, is a solid investment, especially for those unclear about what bonds and shares actually are. Property is seen as a tangible asset, that can be looked at, altered, improved and where value can be added through redevelopment.

The property market is highly regulated, mature and transparent, albeit with some challenges which lie ahead.  Property values and rental incomes are not strongly related to the stock market and other world events.  Although it does have one significant drawback, it is not at all liquid.  It is difficult to sell a property at short notice. This is even more difficult if you are a part owner and you want to release your equity.  However, I think this issue aside with a recent collection of good news from the economy as a whole – unemployment at an 11 year low and manufacturing activity at a 30 month high – more investment should instill confidence in the year ahead.  But as ever there are always risks around the corner, not least I hear from my peers is the government's lack of engagement generally with the real estate industry.  Couple this with a general consensus of the impending impact of a business rate hike across many property sectors in the last week, the triggering of Article 50 and the rise of inflation in recent months there may be disruption.  However, what is clear and is proven time and time again is that UK business is well able to respond to changes and challenges.

Putting this altogether where would I look for value in the future.  A key factor I have always considered important is to hold a diverse portfolio.  Industrial is in my opinion a strong sector with reasonable prospect for rental growth in the coming 12 / 18 months.  Creating income and revenue growth is the key fundamental factor.  Residential, especially the private rented sector is also seen as an opportunity too.  The quality of the investment should never be overlooked and retaining an agility to adapt will be a key for the successful investors of the tomorrow.

Paul Palmer, TDA Estates Manager, can be contacted at paul.palmer@tedcltd.com

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