2014 investor insights report

8/12/2019 2014 Investor Insights Report

1/12


2/12

Contents

01 Introduction

02 Overview of Investments

05 Risk vs. Return

09 Property Market

14 Future Outlook

16 Investor condence in the UK economy

18 Summary

The UK economy has returned to growth

and the recovery is showing no signs of

slowing up, according to the most recent

gures. In a report released on May 14th

2014, the Bank of England predicted a 3.4%

growth in the UK economy this year,

while the banks governor Mark Carney

revealed he expects to see further growth

of 2.9% in 2015.

As a result, there has been a marked increase in private investor activity. Havingsheltered during the recent recession and economic stagnation, UK investors arenow seeking new opportunities. So which avenues should they be exploring?

All options are pretty healthy at the moment with the FTSE currently at a15-year high, and the property market is thriving amidst rising house prices.ISA allowances have also increased, while recent pension reforms have freedup cash which could potentially be used for investments. In other words, theopportunities are rife for todays investors. So what do the investors themselvesmake of the economic outlook?

In order to take the pulse of the UKs investors, specialist investment companySelect Property commissioned OnePoll, a leading independent market researchcompany, to question 2,400 investors as one of the UKs most extensive everinvestor surveys.

The survey aimed to nd out what UK investors are investing in, how muchtheyre earning and what they deem to be the safest and most protableinvestments. And at a time of considerable economic growth, what is t heir generaloutlook for the coming years and how do they see t heir investments performing?

01

Select Property | 2014 Investor Insight Report


3/12


4/12

elect Property | 2014 Investor Insight Report Select Property | 2014 Investor Insight Report

Risk vs. Return

he level of risk and potential returns are the

main motivators specied by the UK investors

urveyed, so what investments do they believe to

e the safest and most protable?

ist of investment classes in order of safety,

ccording to UK investors:

Ranked 1 as most safe, 7 as least safe)

ISAs

Property

Savings Accounts

Bonds

Stocks/Shares

Commodities

Alternative (i.e. lm, wine, stamps etc.)

he Safest

Most investors consider ISAs to be the safest

nvestment option which isnt surprising given

hat they are essentially accounts which enable

ou to save cash and earn interest, with little to

o risk involved although investment ISAs can

e slightly riskier as they depend on the stock

market. Almost half of all adults in England have

n ISA, with over 440bn held in ISA accounts

t the end of the 2013 tax year. ISAs also have

he added appeal of a tax free allowance of up

o 15,000, which ts in with the majority of

nvestors who have a budget of 20,000 or less.

espondents to the survey ranked property as

he second safest option, ahead of categoriesuch as savings accounts and bonds. This could

e because growth in the property market is

riven by real housing demand, which is less

peculative in contrast to t he stocks and shares

market. Those surveyed also revealed that there

a sense of comfort in the fact that property is

angible; rather than simply a piece of paper or a

umber in an account.

The Riskiest

Commodities, meanwhile, can be found at the

bottom end of the safety scale. This is perhaps

not entirely unexpected, as gold, oil and rare

metals are all subject to rapid, trader-inuenced

changes in value. As such it is a fairly specialised

and complex investment arena which, if

successful, can prove highly protable for those

in the know, but for the average investor it

probably appears particularly risky.

Alternative investments are considered the least

safe and can be extremely risky, but at the same

time have the potential to be very protable.

Alternative investments can be anything from

classic luxury cars to antique stamps, and there is

generally less of an understanding of where the

market will go with these types of investments.

For instance, a report by the Historic Automobile

Group in September 2013 revealed that the

value of vintage Ferraris had increased 55%

in the past year which obviously would have

resulted in a signicant windfall for those

investors savvy enough to have recognised the

potential in this asset.

As a way of minimising the risk on their

investments, many of those surveyed choose

to spread their cash across different avenues,

research their investments thoroughly and only

place their trust in the hands of well-established

companies and names. Many also seek nancial

advice prior to making a nal decision on an

investment.

List of investment classes in order of

protability, according to UK investors:

(Ranked 1 as most proftable, 7 as least

proftable)

1. Property

2. Stocks/Shares

3. ISAs

4. Bonds

5. Commodities

6. Alternative

7. Savings Accounts

The Best Returns04 05


5/12


6/12

elect Property | 2014 Investor Insight Report

Property Market

Given that property is therst choice investment forthe majority of UK investorsif they had 100,000 toinvest, as well as rankingas the most protable andsecond safest investmenttype, it is worth taking a

closer look at the factorsthat make property such anappealing option.

The most common types of propertiesUK adults have already invested in:

1. Buy-to-lets (44.1%)

2. Family Homes (43.8%)

3. Student Housing (21.3%)

4. Overseas Holiday Homes (13.3%)

5. UK Holiday Homes (12.1%)

Buy-to-let properties (44.1%) and

family homes (43.8%) remain the

most popular investments, followed

by student housing, overseas holiday

homes and, nally, domestic holiday

homes. So why do so many investors

choose to explore the property

avenue?

Optimism appears to be a key factor,

with six in ten UK investors either

condent or very condent in the UK

property market.

Investors between the ages of 2534

are the most condent about the UK

property market (62.5%), whereas

35-44 year olds are most negative

(12.8%). This may be down to the fact

that investors in the 25-34 year old

age group are embarking on their rst

property investments at a time when

prices and the economy in general are

recovering. Those in the 35-44 year

old bracket may have experienced a

fall in the value of their investments

in the immediate aftermath of the

global nancial crisis and thus have yet

to see their condence fully restored.

In terms of regional condence,

investors from London are most likelyto be condent about the property

market (68.3%).

In terms of actual purchases, 45-54

year olds, are most likely to have

invested in property (42.6%) while

18-24 year olds are least likely (33%)

which, given the amount of capital

usually required is not that surprising.

For the vast majority propertyremains an attractive proposition.Some of the key reasons cited by

investors for their optimism in themarket include:

Rising house prices

Owning a property is a goodby-product to the investment

The recovering UK economy

Shortage in housing & thesubsequent high demand forproperty

The general condence in the

recovery of the property market is

backed by insights from industry

experts; a recent report from the

National Institute of Economic and

Social Research (NIESR) predicts

a 7.8% price rise this year with a

further 4.2% increase in 2015. In

terms of regional statistics, people

from London are most likely to have

invested in property (49.7%) whereas

those in the North West are the least

likely (35.7%). Londoners preference

for property is perhaps unsurprising,

given the rapid rise in house prices

in the capital. A report released by

property website Rightmove on

19th May 2014 revealed the average

asking price for a London home has

risen by 80,000 since January 2014.And while the North West property

market is showing signs of recovery, it

is happening at a slower rate than that

of London and other parts of Southern

England.

Another reason behind the popularity

of property could be the level of

understanding that investors believe

they have of the sector, with more

than six in ten (60.4%) stating that

they feel slightly informed about the

property investment market. Close to

one fth (19.8%) say they actively stay

up-to-date with the market. 18-24

year olds (8.9%) would be most likely

to describe themselves as experts,

compared to just 0.6% of those aged

55 and over.

With the possible exception of savings

accounts, it is unlikely that the averageinvestor has the same general level of

knowledge or understanding of other

investment categories, which may go

some way to explain why property is

the preferred option.


The average asking price for a

London home has risen by

80,000 since January 2014

0908

Rightmove


7/12

o what about the specicypes of property people

ook to invest in?

uy-to-let properties remain the most

opular option, and as mentioned

reviously, the high rental returns

ontinue to attract investors. Add the

ecent rise in house prices, and its

ear to see why the buy-to-let market

ppeals to so many people in the UK.

Most investors (44.7%) nd capital

ppreciation and rental income to be

qually important, hence why buy-

o-let investments offer a good mix of

oth.

nd while government schemes have

nabled more buyers to enter the

market in the past year, the signicant

hortage of housing across the UK

means the high demand for rented

roperty is expected to continuento the foreseeable future. A recent

eport by The Royal Institution of

hartered Surveyors predicts that the

hortage will lead to a rise in house

rices for years to come.

amily homes are of course a popular

ption, and like buy-to-let investments,

hey too are experiencing a signicant

se in prices. However while a lot

f people own a family home, not

everyone necessarily looks upon it as

an investment as they may spend large

amounts of money on a home over an

extended period of time without the

benets of rental income.

The least popular property groups

are UK and overseas holiday homes

and this may well be because they are

often considered a luxury purchase

rather than a strong investment

and therefore are unlikely to be a

priority for most investors. It is also

worth considering that the economic

uncertainty surrounding the Eurozone

has acted as a deterrent to UK

investors.

For example, the Spanish property

market, which has historically been

popular with UK investors, has

experienced signicant price drops

in recent years. Although overseas

buyers could potentially pick up a

bargain property as a result, many

will be wary of investing in a country

where the future outlook of the

property market remains very

uncertain.

More than a fth (21.3%) of investors,

meanwhile, choose to focus their

attention specically on the student

property sector.

This is a large percentage for a niche

market and the gure has grown

signicantly in recent years. According

to the 2014 Knight Frank Student

Property Index report, the student

accommodation sector has produced

positive rental growth throughout

every year of the economic downturn.

The average rental growth in the UK

was 1.59% in the year to September

2013, according to The Knight

Frank Student Property Index. Total

investors returns in student property

for the same period were 7.8%, and

as a result an increasing number of

investors are starting to take notice

of the high yields associated with this

niche market. A report by CBRE, for

example, revealed student property

investment increased by 125%

between 2011 and 2012, whilst a

2013 report by Savills predictedtotal returns of 9.3% for the 2013-14

academic year.

Rental growth in 2014 is expected

to hover around the 2.75% mark,

while the total investor returns in

September 2013 were 7.8%, according

to the Knight Frank Student Property

Index Report 2014.

Select Property | Predictions for the UK property market in 2014

0


11

7.8%

Total investor returns in student

property in September 2013

Knight Frank Student Property Index Report 2014


8/12

efore any new investment we always

o extensive research into the market

o we can nd the safest and most

rotable opportunity. This time

ound it was the student property

ector that caught our eye.

he returns that can be achieved

re so much higher than the average

K rental yield and student demand

or purpose-built developments is

rowing rapidly.

acqueline and David, buy-to-let

nvestors from Monmouthshire in Wales

The strong performance of student

accommodation is driven by a

combination of a high number of

UK and international students at

UK universities, and a signicant

shortage of student properties.

Figures from the Higher Education

Statistics Agency (HESA) reveal that

an increasing number of international

students are choosing to study in the

UK, with a total of 425,265 enrolled

during the 2012/13 academic year.

Combine that gure with UK students

and the total UK student population

for 2012/13 stood at just over 2.3

million, all of whom need to live

somewhere during their time at

university hence the demand for

suitable accommodation.

The Knight Frank Student Property

Index Report 2014 also predicts

domestic, European Union and

international student acceptances will

rise over the next ve years,

with a 3% rise expected ahead of the

new academic year in September

2014. It adds that student property

returns, will continue to outstrip

traditional asset classes with yield

compression in 2014.

The growth in student property so

far has been centred on Russell

Group university towns and cities

where the UKs top 24 universities

are located. The Knight Frank report

reveals all those core markets remainstructurally undersupplied in terms

of student accommodation and the

undersupply will not be corrected

within the short term. In other words,

rental yields are likely to remain

strong for the foreseeable future.

Demand for luxury accommodation

is increasing, as 58% of students

reported wanting a good standard of

upkeep according to a recent survey

by utilities provider Glide.

It also revealed that access to a fast

internet connection was the main

factor for 82% of students. Other

factors such as large televisions and

en-suite bathrooms were further

down the list but were still seen as

important in nearly 40% of cases.

Purpose-built student accommodation

is often fully-managed, meaning

investors dont have to spend any time

maintaining the property and dealing

with tenants.The demand for studenthousing also means there will be no

gaps in tenancy, ensuring a steady

stream of rental income.

Gillian Stephens from Cambridge

has several investment properties in

both the UK and South Africa, two

countries which she splits her time

between.

As well as expressing condence in the

UK economy, she also chooses to focus

on a specic buy-to-let market which

she believes offers the best chance of

strong rental returns in the long term:

Regardless of the economy or the

political situation in the UK, the

country will always educate its

children and this commitment is

now embedded in the very fabric

of UK society. This means that the

higher education system in the UKis ourishing and I rmly believe

that this is likely to continue for the

foreseeable future.

Because of this, I have been investing

in buy-to-let property aimed at UK

students since 1998 and have enjoyed

strong rental returns throughout

this period. I also have the condence

that the UK is a safe place to invest

at the moment due to the strength

of the pound.

elect Property | 2014 Investor Insight Report Select Property | 2014 Investor Insight Report

2 13


9/12


Future Outlook

he types of properties UK adults aremost likely to purchase in the future:

Buy-to-lets (45.6%)

Family Homes (42%)

Student Housing (22.8%)

UK Holiday Homes (13%)

Overseas Holiday Homes (9.1%)

ooking ahead at what property

nvestors are likely to purchase during

he remainder of 2014 and beyond,

he top three property groups remain

nchanged for the majority of people.ust under half of investors (45.6%)

will look to invest in the buy-to-let

market, with four in ten (42%) looking

t family homes and 22.8% keen to get

n on the student housing market.

arlier this year, Chancellor George

sborne announced that as of 2015,

ension savers will no longer have to

uy an annuity to take money out of

heir pensions. Some have expressed

ears that the spare money suddenly

vailable to pensioners will result in a

udden spike in buy-to-let purchases,

with subsequent concerns about

he possibility of a housing bubble.

ccording to forecasting group Ernst

Young Item Club, however, such

ears are exaggerated. Peter Spencer,

Chief Economic advisor to the Ernst &

Young Item Club, believes stricter loan

criteria from mortgage lenders will

help protect the market. He said:

If these (mortgage lending) controls

are rigorously applied this will

eventually constrain London prices

and head off problems when interest

rates rise.

With regards to the pension annuities

announcement, eight out of ten

(82%) investors questioned in Select

Propertys survey say they havent

been affected by the announcement.

Those who have been affected

revealed they intend to put more of

the money originally earmarked for

investments towards their pension.

Londoners (30.9%) were most heavily

affected by the announcement, which

suggests London based investors may

be more reactive and willing to alter

their investment strategies.

When assessing their investment

portfolios as a whole, over half (56.5%)

of investors intend to keep their

portfolio at the same level over the

course of the next 12 months and a

third (33.5%) would like to increase it.

Male investors, meanwhile, are more

optimistic about the next 12 months

(38.6%) than females (32.2%).

In terms of performance expectations,

most adults (49%) expect their

investments to maintain their

performance levels in the next 12

months and more than a third (35.9%)

believe they will perform better.

Six in ten (60.5%) feel condent or

very condent in their investment

portfolio, with just 8% expressing

negative feelings towards it. And

when asked about their long term

expectations, half of investing adults

say they believe their investments will

perform better in the next ve years

compared to the previous ve (52.6%),

but just over one in ten (13%) think

theyll worsen. More males (56%) than

females (47.9%) believe their portfolio

returns will improve during the next

ve year period.

Over the next 12 months, how do you think your investments willperform in comparison to the previous year?

35.9%said they would perform

Better

15.9%said they would perform

Worse

49%said they would remain

The same


4 15


10/12

nvestor condence inthe UK economy

he strength of the UK economy has

considerable impact on investor

ondence, and the signs of growth

ollowing recession have clearly had a

ositive effect on UK investors.

he UK economy continues to grow

ollowing the recession; with a report

rom The Ofce for National Statistics

ONS) on 29 April 2014 revealing theK economy grew by 0.8% in the rst

uarter of 2014.

his follows on from a revised ONS

eport on 28 March 2014 which

evealed the economy grew by 1.7%

n 2013.

lmost six in ten adults are condent

n the countrys economy (57%), while

most three in ten arent sure (29%)

nd just 12% feel negatively towards it.

The 55+ age group is most condent

about the general UK economy

(60.8%) whereas 35-44 year olds are

most negative about it (15.7%).

More than six in ten (64%) of UK

investors claim the UK is the safest

place for investments. Although this

may not come as a surprise given the

surveys UK demographic, it howeverdoes indicate a condence and

positive outlook in relation to the UK

economy.

That being said, only four in ten

(37.3%) of investors deem it to be the

most protable place for investments,

with nearly a quarter (24.8%)

favouring South East Asia and 11.2%

choosing Europe.

The general optimism among investors

is backed up by a recent report from

NIESR which states the UK economy

was nearing its peak before the

nancial crisis. The NIESRs most

recent growth forecast for 2014 is

2.9%, prompting them to predict that

growth will exceed its 2008 high in the

coming months.

Jonathan Portes, the NIESR Director,

explained:

The end of the great recession, it is

an important moment. The British

economy is very close to being bigger

than it has ever been. Symbolically,

that matters, and it comes at a time

when growth is clearly entrenched.


6

8.7%Very condent

11.8%Quite negative

48.9%Quite condent

1.7%Very negative

29%Indifferent


17


11/12

6 16

Select Property | 2014 Investor Insight Reportelect Property | 2014 Investor Insight Report

Summary

The average UK investor has earned 5%

n their investments over the course of

he last 12 months, although almost half

43.7%) only earned 0-4%. Despite that,

65% of investors claim it would take an

verage return of 6.2% in order for a new

nvestment to appeal to them.

he level of return and the risk involved rank as the two

main motivators among most investors. Risk is the main

actor for 42%, while 37% place the most emphasis on the

otential returns on their investment. Most UK investors

onsider ISAs to be the safest investment category, followed

y property which may be because ISAs offer a range of low-

sk options for investors, while rising prices in a recovering

roperty market have helped to boost investor condence.

s a whole, investor outlook for the next few years remains

ositive, with nine in ten intending to either maintain or

crease their portfolio size in the next year, while the same

umber believe their investments will either remain the

ame or improve over the space of the next ve years.

Both investors and industry forecasters expect UK property

prices to rise further in coming years, which partly explains

why property is ranked as the most protable investment. It

remains the preferred option among investors, with four in

ten revealing property would be their rst choice if they had

100,000 to invest today.

Traditional buy-to-let properties remain the investment

of choice for four in ten people, although 22.8% say they

are most likely to invest in student property in the future.

Student housing is experiencing signicant growth, making

it an increasingly attractive proposition to would-be

investors looking to capitalise on the huge demand forstudent accommodation across the UK.

The outlook for t he property market as a whole looks very

positive, thanks to stable interest rates, rising prices and the

fact that demand continues to signicantly outstrip supply.

The most signicant theme to emerge

from Select Propertys 2014 Investor

Insights survey is a feeling of optimism.

A combination of the recovering

property market and the upturn in the

economy has led to investors b ecoming

much more condent in the future of

their investments a sentiment which

is illustrated by one in three of those

surveyed stating that they are aiming toincrease their portfolio over the course

of the next 12 months.

As condence in the UK continues to rise, the number of

investments taken out will also increase which will in turn

create a stronger, more competitive market across all

sectors. In short, it seems like its positive news all round

whether you want to put your money in stocks, stamps or

student property.

Both investors and

industry forecasters

expect UK property

prices to rise further in

coming years

8 19


12/12

Select Property | Predictions for the UK property market in 2014

AboutSelect PropertySelect Property is the UKs largest seller of overseas investment

property, having sold more than 9,000 properties to residents of more

than 100 countries over the past 10 years.

Since 2004, Select Property has become Europes leading DubaiMarina property expert, as well as selling properties in Turkey, Egypt,

Spain, and the United Kingdom.

In 2012 the CEO of Select Property, Mark Stott, together with Chris

Oakes of award-winning residential homes developer Huntsmere,

founded the Vita Student accommodation brand. To date, more than

1,200 Vita Student properties have been sold to investors from

around the globe.

Contact Us

The BoxHorseshoe LaneAlderley Edge

CheshireSK9 7QP

Phone Us

Speak to Select Propertys property

consultants to nd out what

opportunities are available for you.

United Kingdom:

+44 (0) 207 123 4000

Dubai:+ 971 4446 2756

Visit Us Online

Visit us online at:

www.selectproperty.com

and take a look at the range of

properties available in the UK and

Dubai .

Email Us

United Kingdom:

[email protected]

Dubai:

[email protected]

2014 investor insights report

Documents