What It Means to Diversify Your Investment Portfolio

Diversification is the practice of spreading money between different investments and asset classes to reduce risk. A good diversification strategy works to limit risk by having too many funds in one vehicle while maximising returns by having investments in a mix of higher and lower risk instruments, such as equities and property. Adding a property in another country to a portfolio is a great way to diversify. International property markets can offer consistent returns and relatively safe growth strategies if the investor makes a sound investment by finding the right asset. Investing in Buy-to-let Property in the UK The UK is an excellent example of a lucrative and stable international property market where the average value of houses has increased by 18% in the last three years. In recent years, the demand for residential property in the UK increased due to the regeneration of smaller towns and cities. As a result, the buy-to-let market for entry-level properties is experiencing substantial growth. More people in the UK are actively choosing to rent, both due to affordability and lifestyle factors. According to the UK’s Resolution Foundation, over one-third of people born between 1980-1996 (Millennials) are projected to rent property their entire lives. In addition, build-to-rent apartments are set to see increased demand, as under 40s are looking for bigger living spaces with improved amenities such as wi-fi to enable flexible working arrangements. The UK property market has exciting growth prospects:

• The five-year house price forecast as of March 2021 projects an increase of 21,1% until 2025
• Prices have risen by an average of 5% in 2021
• The era of low interest rates and cheap borrowing seems set to continue
• The North of England is growing substantially and attracting more interest than the South
• Demand is up 12,4% compared to 2020, according to the House Price Index
• The UK’s supply of housing hasn’t kept up with population growth
• 7 million households in the UK rent privately
• The government is investing in urban regeneration and commuter belt towns, increasing property demand in these areas
• Average UK house prices have increased by 300% since 1999

 (Sources: JLL UK Residential Forecasts 2020-2025, Savills Research, Coulters Estate Agents) If you are considering and reviewing the various different types of property investments available in the UK you may or may not already have come across student accommodation investment opportunities. Despite the rapidly increasing cost of tertiary education in the UK, the growing number of international students wanting to study in the UK is due to increase even more over the next decade.

Buy-to-Let Student Accommodation: Is it a Good Investment?

Student accommodation has been one of the fastest-growing property investments in recent years. Applications to UK universities have grown substantially with 40% of 18-year-olds submitting applications to study in 2020/2021 creating a higher demand for student accommodation. One of the most popular categories is PBSA or Purpose-Built Student Accommodation which mostly comprises of modern, newly built studio apartments with shared communal facilities and modern amenities like wi-fi and built-in appliances. The main benefit of Purpose-Built Student Accommodation is the lower purchase price than residential property, but higher rental yield due to premium locations and high demand. As a result, the rental yield on a PBSA investment in the UK can be as high as 8% in the right area. Students are also no longer regarded as high-risk tenants as parents often act as guarantors. Northern cities in the UK show the most growth potential, exceeding the growth of similar real estate in London. These include:

• Liverpool – A student population of about 70 000 and rental yields of 5,48% on average*
• Leeds – A student population of about 60 000 and rental yields of 5,12% on average*
• Manchester – A student population of about 90 000 and rental yields of about 5,16% on average*

*Based on Zoopla average house price and rental cost statistics. Zoopla is one of the UK’s largest property portals

At Safcom Investments we specialise in buy-to-let property investments and offer expert advice as well as support to clients across the world in various other specialist areas of expertise. We want to help you achieve your property investment objective. Book a complimentary telephonic consultation with us if you need expert assistance with the property investment opportunity that best meets your financial objective.

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To find out more on International Property Investment and how to grow and diversify your property portfolio, download our guide to investing in international property.