Safe As Houses

An interview with Joe Billingham Founder or Prosperity.

One thing is clear; UK house prices are increasing. Higher confidence, low borrowing costs and improving consumer sentiment are boosting demand.Yet with the UKs economic recovery still classed as fragile by some, is the UK property market back at full force and ready for business once again?Many will hope so, as the future income of Britain’s growing, ageing population remains under threat. With predicted pension incomes at an all-time low,the UK Government continues to encourage alternative investment for future income. So - is property the next best investment?


Growth in house prices and lucrative buy-to-let yields are making property investment an appealing option for many, particularly as floundering annuity rates and excessive charges continue to undermine the chances of getting a decent income from a traditional pension.Across the vast number of studies, average figures reveal that one in three people have abandoned pension saving and instead turned to property to fund their retirement. So what do the experts think?


UK property fund manager Joe Billingham has over 20 years’ experience working in the industry. Joe’s passion for property as the No 1 asset class has been widely documented. Presenting at lectures and seminars across the world, Joe currently manages over£50 million of UK property and is founder of Prosperity, the innovative property for pension product allowing clients to purchase discounted UK property on a monthly payment plan. 


UK pensions, where is it all going wrong?
   
The issue is twofold. Prolonged life spans are forcing the UK pensions industry to support a greater number of pensioners for longer periods.This combined with continued poor performances in stock market returns, creates a situation where more people than ever are feeding off smaller returns than ever, as the pension funds fail to deliver. Then, most have no access to these monies until the age of 55 or 60 years, at the earliest. And so it becomes a vicious circle - once retired, many people then have to use their pension savings to buy an annuity to provide an income for the duration of their retirement. As people are living longer, this combined with low yields on gilts, paints a bleak picture. The message is clear - minimum contribution levels just will not provide a comfortable standard of living in retirement. Of course, the Government clearly have a hand in presenting the situation in such a way. They have a key objective to encourage people to save for their own retirement.

Why property?

Property holds many critical benefits as an investment over any other asset class. It is tangible – you can see it. That stands for a lot nowadays, and certainly for those who have been stung in the past by ‘faceless’ funds. Property is the one asset class that buys itself through its own income generation. Rental property can generate monthly income for as long as it is required.

Going back to the matter of population - analysts are estimating that the UK population will overtake Germany as the EU’s highest population by 2045.  So while annuity rates are potentially damaging future retirement income, property has the longevity to match increased life expectancy.
This is a clear message; it is the dawn of an incredibly lucrative time for UK property investment. 



How is the UK property market currently?

Just like the rest of the world, UK property has seen some resistance. OK it’s taken a bashing but not as much as some other asset classes. All of the signs that we’re at the beginning of the next cycle have come back around and will show themselves via a strong growth period for next three to five years. It’s cyclical, the signs are always there. And it’s clear that investors on a global scale are recognising this. We’ve seen a significant increase in overseasinterest from expat and locals, so the message via the media as well as financial advisors and lending professionals is clearly coming across.

Average house prices have increased by £14,000, or 8.8 % in a single year. In fact, they have risen at their fastest pace since 2010 - this is proved by the latest Nationwide house price index.Average property values have risen 0.7% month on month, now reaching £176,491. This is the highest average price since April 2008. What’s more, January marked the 13th consecutive monthly rise in property values resulting in a positive reaction from the lenders.



Isn’t this just the capital, London though? What about the rest of the country?

Not at all.Demand for London property remains strong,it has a great reputation as a safe haven for foreign investment. We are proud of this and are using it to great advantage. We are already witnessing this investor confidence spreading into commuter belts circling the capital as well as other key cities - many of which have experienced unprecedented gains in rental demands over the past 18 months as undersupply has forced tenants into discovering neighbouring areas. The UK Government has made significant commitments to increase national infrastructure, creating an even greater rental demand across commuter areas, market towns and putting lesser known regions firmly on the rental map. Some of the country’s largest Insurance organisations are pledging to invest over £25 billion in related fund vehicles – this says something.


How does the land lie for landlords?

Where in recent years, lenders have ceased low rate  deals claiming to be concentrating on the first-time buyer and re-mortgage market, now landlords are very much back in the market. In response to the rising demand from investors attracted by the increasing rental charges, land lords are now gaining access to a far wider variety of mortgageproducts via the big lenders - ever more eager to access the less risky borrowers. As an example, Post Office Mortgages has returned to the buy-to-let market offering a range of two and five year fixed rates. This is a clear indication that the competition is rising amongst the lenders, forcing them to up the ante.

21st February 2014