The last few years have been incredibly rocky for the financial markets, particularly volatile entities such as stocks and forex.
The stock market has been particularly hard hit by volatility since the beginning of 2022, with the S&P 500 falling by 11% in the year-to-date. During the same period, the Nasdaq 100 has plummeted by nearly 17%, creating a significant challenge for investors who buy-and-hold equities and treat them as a secure store of wealth.
When it comes to appraising alternative options, real estate is arguably far more rewarding in the current economic climate. But why is this the case, and what are the advantages of investing in real estate?
Appraising the Growth of Real Estate in the UK
There’s no doubt that the real estate market in the UK has been a high growth entity for years now, with a continued shortfall of private and social housing contrasting with demand to send property prices soaring.
Overall, this has left the UK in a position when it needs to build a staggering 340,000 new homes a year until 2031 to help meet ongoing demand. At the same time, the UK has seen an average annual net loss of 24,000 social homes since 1991, which has also driven prices up in the private rental market.
But how have these factors impacted on real estate growth on these shores? Well, the latest data from Nationwide revealed that the average house price in the UK is now at a record high of £260,230, with annual price growth having peaked at 12.6% during the last 12 months.
Overall, average house prices in the UK are now 20% higher than they were in 2020, while this trend shows no sign of abating anytime soon.
Manchester property investment, in particular, has seen a considerable uptick in popularity in this time – with the rental market seeing massive growth.
Again, this is no doubt due to the widespread demand for property in the UK. In fact, a 2020 study by Zoopla found the ratio between supply and demand in the region to be around 1:5, essentially meaning that for every single pre-existing property, five people want a home.
OK, So What are the Advantages of Real Estate Investment?
One of the biggest advantages offered by real estate investment is its flexibility, with a host of associated investment vehicles available to individuals.
We’ll touch more on these below, but there’s also benefits to investing in real estate as a buy-and-hold investment.
Through this vehicle, it’s possible to buy properties and retain them while their resale values continue to rise, while simultaneously leveraging them as buy-to-let assets that can deliver a small monthly yield.
This can unlock both short and long-term profits when investing in real estate, while the level of demand that exists for real estate also creates significant market liquidity.
How to Invest in Real Estate
If you’re keen on investing in real estate but don’t know where to start, you may want to consider liaising with a wealth management expert.
A skilled investment management firm can identify the best vehicles for you, helping you to target real estate assets in line with your budget, risk appetite and underlying financial objectives.
These vehicles will include crowdfunding (through which you’re empowered to access real estate investors in the residential and commercial spaces) and so-called “REITs”.
Publicly traded REITs (or real estate investment trusts) refer to companies that own commercial real estate such as shopping centres, hotels and offices. Through such vehicles, you can invest in shares of these companies on a public stock exchange, without assuming ownership of the underlying property assets.
REITs are also legally required to return a minimum of 90% of their total taxable income to shareholders each year, so this investment vehicle can offer attractive rewards and dividends over time.
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