2014 investor insights report
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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?
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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
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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.
Select Property | 2014 Investor Insight Report
The average asking price for a
London home has risen by
80,000 since January 2014
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Rightmove
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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
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elect Property | 2014 Investor Insight Report
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7.8%
Total investor returns in student
property in September 2013
Knight Frank Student Property Index Report 2014
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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.
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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
Select Property | 2014 Investor Insight Report
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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.
elect Property | 2014 Investor Insight Report
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8.7%Very condent
11.8%Quite negative
48.9%Quite condent
1.7%Very negative
29%Indifferent
Select Property | 2014 Investor Insight Report
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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
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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:
info@selectproperty.com
Dubai:
sales@selectproperty.com
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