At Haggar Construction, we are passionate about property development. Since the late 1990s, the market has continued to grow and proven to generate reliable returns for investors. However, investing money into property is not without risk, especially for new investors. This article will discuss both the pros and cons which will provide you with some basic knowledge to make your own, informed decision.
Property development can usually be summarised as investing in residential or commercial property (also known as real estate across the Atlantic). In the UK, this is typically buying an additional home to the one you live in to rent out or to renovate and sell for a profit. Renting out a property to tenant or business provides investors with a second income and potentially allows them to add further properties to their portfolio in the future. This also relies on the property increasing in value but if current trends continues, this is likely but not certain. Renovating a property to sell on requires good knowledge of a property’s potential and making changes that adds to its overall value. Generally, this relies on either being a skilled tradesperson yourself or having contacts in the construction industry to complete the renovations for you.
Pros
- New housing supply is currently lower than the Government’s ambition and research suggests still far behind from meeting the demand.
- Long term returns – with interest rates so low presently, property is likely, although not certain, to rise in value over ownership and therefore supply a high return on your initial investment.
- Short-term returns – if you can buy a property below market value (BMV) and recognise the potential, renovations can add more value with quick profits obtainable.
- Renting out a property to a tenant or business can pay off the mortgage over your ownership whilst providing some extra income. Demand for renting continues to be strong and shows no sign of declining.
- Investing in property has proven to be stable and less risky than other investment opportunities such as the volatile stock market. Although there are market fluctuations, many cooperate businesses are now investing in building new homes.
- Retirement options – ownership of properties can support an extra income or you can pass on the property to your child/children (subject to the property changing ownership 7 years before you die).
Cons
- The UK laws regarding second properties or more is subject to change resulting in potentially higher fees in the future and therefore less profits.
- Very few economists predicted the recession and subsequent decline in property values in the late ‘90s. Equally, the rise in prices during the pandemic. With the rise in living costs and fallout from the pandemic, market values can change quickly.
- Buy to let taxation changed in 2020 phasing out the ability to offset mortgage interest against profits.
- If renting a property, there may be times where it is vacant and therefore no income generated. Conversely, a tenant may fall into arrears and further delays in eviction and associated costs.
- Just as interest rates can rise or fall, so too can the value of your property and potential rental income.
- If you oversee many areas of the property development, it can be time consuming and stressful when things go wrong.
Do you need some advice?
We continue to believe that property development is an excellent choice to consider when investing. At Haggar Construction, we have a network of teams, tradespeople and specialist support in all areas of property development from buying land, new builds and renovations to improve value.
We pride ourselves on delivering smart, sustainable solutions for our clients’ construction projects, giving each project the time and focus it deserves and ensuring the highest quality outcomes. We are a family-run business with a huge amount of experience in the construction industry, working on large and small scale projects, but always with the highest level of commitment and professionalism.
If you’re looking for a hands-on team to help you with your project, please do not hesitate to get in touch and one of our friendly team will be happy to help.
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