BLOG: Property opportunities across the pond
Although investing in property is generally considered a safe bet, there are still many factors to consider, some less obvious than others. It might also seem to be more logical that British property is safer than overseas property because with a house down the road, you can go and see the property for yourself. However, it is very easy to find a great deal without visiting the property, and vice versa, that is to embark on an ill-fated adventure a short walk from home.
Investors today have tools enabling them to remotely check the important parameters of any deal far more easily than in the past: who is selling the property, a listed company, or private unfamiliar seller? Whether the transaction was reviewed and approved by a distinguished banking institution? Is this a single private apartment in which vacancy can cause great losses to an investor or a big project? Is it a development project or a project that yields revenue from day one? And in what direction is the market headed in the area you are looking?
Although for many the UK will be the first port of call it could be worth taking the time to explore other options.
As has been well documented, the US suffered the most from the financial crisis in 2008 but is now starting to recover. During January to November 2013, the S&P/Case-Shiller national home price index skyrocketed by 13.88%*. By contrast in the UK, e.surv data found that house purchase approvals fell by 19%** between January and April of this year. This trend is expected to increase with base rate rise now likely towards the year end, following recent comments by the Bank of England and tighter lending multiples on mortgage to try and avoid any bubble. Consequently, this has led to yields of 4-6 % in the UK compared with potential double digit annual returns in certain parts of the US.
With annuity returns at record lows, and the recent policy changes reflective of the little faith that many people have in long term pension performance, property could represent an opportunity for some investors. And for those concerned about being caught out by the possible property bubble, taking the time to look further field could pay dividends.
Sophie Carter is managing director at CityR UK.