The recent Halifax House Price Index showed that prices rose by 5% in the three months to April, compared with the same period a year earlier. It is the fastest annual growth rate since February 2017 and is up from 2.6% in the three months to March.
Despite Brexit uncertainty impacting the property market there are clear signs of its resilience. It must also be remembered that while prices are stalling in London, regional markets remain strong, with many flourishing.
With this in mind property remains a great investment opportunity. There are a number of ways an investor can get into property investment, with each having a different balance of risk and reward.
Buy-to-let: Strong start but has hit the stumbling blocks
Over the past few decades buy-to-let investing has created a large amount of wealth for investors. However buy-to-let has hit the stumbling blocks in the wake of new tax legislation and regulation. These actions have contributed to rising property prices as well as hitting investor’s pockets which has led many to get out of the buy-to-let sector. Landlords are now buying fewer homes than at any time in the past nine years. The number of buy-to-let purchases declined 15% year-on-year in 2018. In 2011, every one in five houses sold was sold to someone who planned to rent out the property. Now the number has fallen to one in 10.
Real estate investment trusts and property bonds: Solid but limited yield
REIT’s have proven themselves to be a very trustworthy and safe source of income. As they pay their investors mostly in dividends, suffering lower volatility, and thus helping to avoid costly mistakes during bear markets and lost decades for stocks. An attractive investment for those looking for security, but the trade-off is low yield. Property bonds allow an investor to invest in part of a property development. Their investment is secured by an asset, which makes it an attractive investment. The cost of bonds are also relatively low which opens them up for the retail investor.
Property P2P: High risk, high reward
With P2P having grown in popularity in recent years, property-backed P2P lending has become one of the more popular angles pursued by platforms. At a time of low yields P2P offers yield-hungry investors relatively high-returns, often in the high single digits, with property backed P2P growing in popularity due to investors liking the security of bricks and mortar. P2P carries its risks – it is not covered under the Financial Services compensation scheme which can result in investors losing their money. Consequently, doing detailed research into the company you are investing your money into is key but it must be remembered those who seek financing on P2P lenders often carrier a higher risk than most.
Proptech Investment platforms: An alternative to P2P
Not all technology based property lending platforms are Peer-to-Peer. There are investment options that are similar to P2P but produce slightly less yield for much less risk.