October 11

Investing in commercial property

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Investing in Commercial Property

Investing in Commercial Property

With all of the recent changes in the residential buy-to-let landscape, many property investors are looking to diversify their portfolio by investing in commercial properties such as retail space, industrial lots and offices.

A lot of people think the only ways to get involved in commercial property are through funds and investment trusts or peer-to-peer lending, which usually will only get you shares in a property or portfolio, rather than ownership of the property.

THIS IS NOT TRUE!

It will take more initial cash than a residential property, but direct investment in commercial property is both possible and profitable.

Investing in and managing a commercial property can work a little differently to a residential property, so to help you out I’ve put together this article covering Premier Property’s recommended first steps to get started investing in commercial property.

With all of the recent changes in the residential buy-to-let landscape, many property investors are looking to diversify their portfolio by investing in commercial properties such as retail space, industrial lots and offices.

A lot of people think the only ways to get involved in commercial property are through funds and investment trusts or peer-to-peer lending, which usually will only get you shares in a property or portfolio, rather than ownership of the property.

 

THIS IS NOT TRUE!

 

It will take more initial cash than a residential property, but direct investment in commercial property is both possible and profitable.

Investing in and managing a commercial property can work a little differently to a residential property, so to help you out I’ve put together this article covering Premier Property’s recommended first steps to get started investing in commercial property.

Why invest in student property?

Why invest in commercial property?

So what is the appeal of commercial property?

There are 3 main advantages to a commercial property investment:


  • Greater yields

Semi-commercial properties (such as a shop with an apartment above it) can provide you with an average of 1.6% greater annual gross yield than residential properties in the same area, and the yield of a successful large commercial property such as an office building can be even higher.


  • Long tenancies

Relocating a business is a real hassle, and most of your tenants aren’t going to do it unless they really have to. The right tenants will rent the property for many years, giving you a stable income and peace of mind.

Ideally you will be investing in a property that already has tenants, but regardless you also need to think about how to get those long-term tenants.

This is mostly just a case of properly screening your tenants, which in addition to the usual credit checks and references, should also include building an understanding of their business and whether they will be successful in your location:

Is there a market for their products and services in the area?

Is there the right kind of workforce available in the area?

How much competition from similar businesses will they face?


  • Less labour-intensive

Your tenants will typically handle maintaining the property themselves, as well as furbishing it to their business’ needs, and particularly in the case of retail space they are well-motivated to do this since their customers will be visiting the property.

While with a residential property you can expect to be repainting and dealing with general wear and tear every 18 months or so in between tenancies, with commercial property not only will this happen less frequently due to the long tenancies, there is also no need for major refurbishment as the next tenant will want to furnish and decorate the property themselves to suit their business.


So what is the appeal of commercial property?

There are 3 main advantages to a commercial property investment:

 

·         Greater yields

 

Semi-commercial properties (such as a shop with an apartment above it) can provide you with an average of 1.6% greater annual gross yield than residential properties in the same area, and the yield of a successful large commercial property such as an office building can be even higher.

 

·         Long tenancies

 

Relocating a business is a real hassle, and most of your tenants aren’t going to do it unless they really have to. The right tenants will rent the property for many years, giving you a stable income and peace of mind.

 

Ideally you will be investing in a property that already has tenants, but regardless you also need to think about how to get those long-term tenants.

 

This is mostly just a case of properly screening your tenants, which in addition to the usual credit checks and references, should also include building an understanding of their business and whether they will be successful in your location:

 

o   Is there a market for their products and services in the area?

 

o   Is there the right kind of workforce available in the area?

 

o   How much competition from similar businesses will they face?

 

·         Less labour-intensive

 

Your tenants will typically handle maintaining the property themselves, as well as furbishing it to their business’ needs, and particularly in the case of retail space they are well-motivated to do this since their customers will be visiting the property.

 

While with a residential property you can expect to be repainting and dealing with general wear and tear every 18 months or so in between tenancies, with commercial property not only will this happen less frequently due to the long tenancies, there is also no need for major refurbishment as the next tenant will want to furnish and decorate the property themselves to suit their business.

So what do you need to do before you’re ready for your first auction?

 

The first step is of course to find some properties up for auction that you are interested in.

Search online for auctions in your area and subscribe to their mailing lists to get information on the properties they have at each auction.

Once you have this, you can do all of your usual due diligence researching the property. Visit the property, get a feel for the neighbourhood and crunch the numbers to make sure the property will work for you.

Take additional costs like the auction fees and a 10% deposit into account, you will need these on the day if you win the bidding. If there are substantial extra costs from legal fees or auction fees, adjust your maximum bid to account for that.

 

If you don’t include these in your calculations, you could be in for a nasty surprise later on!

 

The guide price can help here, but bear in mind the guide price may be set low in order to entice you, or high to drive up the price, so do your own research on its market value, decide your maximum bid and stick to it!

It may be worth getting the property professionally valued if you are unsure, and you will have to do this if you will need a mortgage to buy.

Here are some quick tips to get you started:

As a growing market with no sign of slowing down, student accommodation is rife with opportunities for smart investors and can make a great addition to any portfolio!

Student properties have high tenancy rates compared to other buy-to-let properties, and it is usually fairly easy to find tenants each year.

With returns often between 9% and 15%, this kind of investment offers higher returns than other forms of buy-to-let property.

You NEED to be prepared for these!

Look for these types of property at auction for a great deal:

 

·         Out of area.

 

A property in a location far from the auction it is listed at might not interest a lot of people, reducing the bidding on it.

 

·         Out of character.

 

If, for example, most of the properties at an auction are 2 bedroom flats, it is probably safe to assume that is what most of your fellow bidders are interested in.

 

Look for properties that are out of character with the other listings, and you may face less competition at auction.

 

·         Withdrawn from auction.

 

There are many reasons why a property might be withdrawn from auction but still be for sale, for example the seller might have received an offer and cancelled the listing, but the offer later fell through.

 

If the property you want is removed the auction listing, make sure you chase it up and find out why; you might still be able to buy it!

 

·         Guide price too high.

 

If you do your research you should be able to tell when a property’s guide price is overly optimistic. This could put off other bidders and give you a better chance of acquiring the property, but it could also indicate a high reserve price.

 

Next, you want to build up some auction experience before you start bidding for real.

Too many property investors get carried away at auction and end up making investments they will never recover!

Attend two or three auctions with no intention to bid, just to observe the proceedings and get acclimatised to the atmosphere. This is going to help you keep a cool head and make smart decisions when the time comes to actually bid.

 

Listen to how the auctioneers run the auction, and ideally research a few properties beforehand even though you are not bidding. Test your predictions about how those properties perform at auction, and you will have better judgement when it comes to getting the property you want at the right price.

Try to get in conversation with the auctioneers before or after the auction in order to understand how their auctions usually go, and get any other useful tips about the auction or the properties that can get from them.

 

Looking for some more quick tips from auctioneers themselves? Watch this video where I talk to John Stockley of Clive Emson Auctions to get his take on the current market.

Here are few more factors to think about:

·         High degree of development and management risk. Do your research on everybody involved in the deal, you aren’t going to have the same level of control that you would have over other investments.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

Now that you have found a property you want and you have decided to go to auction and bid for it, it’s time to do some last-minute checks:

 

·         Check the property you are interested in is still for sale.

 

Some properties may be sold before auction, so call ahead to confirm and avoid disappointment.

 

·         Bring your ID.

 

You will need 2 forms of ID, photo ID like a driver’s license or passport, and a recent utility bill, will do the job.

 

·         Bring you solicitor’s details.

 

You will need to exchange details with the vendor to start the process of getting a contract written and signed.


 [vd1]I like this, but is there anyway we can avoid people going off of hour site? Maybe embed the document in someway?

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, which can give you great rental yields.

In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

Retail funds available for HMOs can involve a little risk as these funds are often based offshore and unregulated, so think carefully about how to fund your investment. Ask yourself:

Will I be able to get my money out when I want to?

There are a lot of changes coming to HMO legislation on October 1st, don’t get caught out! Archie Maddan and I break down the changes for you in this video:

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

Where to look and what to look for

Getting a great property in a great location can be one of the biggest challenges of commercial property investment.

ALWAYS consider these 3 points when evaluating ANY commercial property location:


  • Transport links

No matter what kind of property or tenant you have, it is vital that the property is easily accessible to nearby residential areas or commuter destinations, as these will be providing your tenants’ workforce and often customers as well.


  • Economic growth

While you should focus on areas where property prices are on the rise for any investment, for commercial property this is doubly important, since this is the most obvious indicator that businesses in the area are finding success.

On that note, it is a good idea to investigate how current businesses in the area are doing financially.


  • AVOID areas with vacant properties

Lots of vacant properties in a location are a warning sign that businesses may have struggled here recently, and you NEED to know why they struggled and how long the property has been vacant for.

Even if you don’t find a reason not to invest in the area, this could give you some idea of which businesses will and won’t be successful in your property.

The above points apply to any commercial property; however each property type has its own additional needs:


  • Retail

When it comes to retail space, the most important factor is footfall:

How many people will walk past the shop each day?

If your tenant doesn’t get enough people through the door to turn a profit, you won’t make a profit either!

High street properties are the safer if more expensive choice; however there is greater risk and reward to investing in sub-prime locations, which can have better yields. You will find it harder to get viable tenants however; you need someone whose business will attract customers away from more central areas.


  • Industrial

Industrial property tenants typically have a large workforce and frequent incoming and outgoing deliveries.

That makes transport networks especially vital, and you also need to think about the available parking space and delivery areas as well as the available workforce in the area.

  • Office

Office tenants can vary a lot in their requirements, but the one thing every office needs is a high-speed business Internet connection.

You are unlikely to find a property without this these days but it always pays to check, as they can cost £1000s to install in some locations, or may not be possible at all.

When investing in either industrial or commercial property, it is also important to think about what type of business is likely to rent your space and any special requirements they might have.

For example, areas with strong Internet and phone networks tend to see lots of call centre offices. These have much larger workforces than other businesses interested in office space; does your location have the transport links and parking space to accommodate that?

Whether you are investing in commercial or residential property there are 3 key questions you need to ask yourself before settling on a location, read my recent article on this for what you need to know.

Getting a great property in a great location can be one of the biggest challenges of commercial property investment.

ALWAYS consider these 3 points when evaluating ANY commercial property location:

 

·         Transport links

 

No matter what kind of property or tenant you have, it is vital that the property is easily accessible to nearby residential areas or commuter destinations, as these will be providing your tenants’ workforce and often customers as well.

 

·         Economic growth

 

While you should focus on areas where property prices are on the rise for any investment, for commercial property this is doubly important, since this is the most obvious indicator that businesses in the area are finding success.

 

On that note, it is a good idea to investigate how current businesses in the area are doing financially.

 

·         AVOID areas with vacant properties

 

Lots of vacant properties in a location are a warning sign that businesses may have struggled here recently, and you NEED to know why they struggled and how long the property has been vacant for.

 

Even if you don’t find a reason not to invest in the area, this could give you some idea of which businesses will and won’t be successful in your property.

 

The above points apply to any commercial property; however each property type has its own additional needs:

 

·         Retail

 

When it comes to retail space, the most important factor is footfall:

How many people will walk past the shop each day?

 

If your tenant doesn’t get enough people through the door to turn a profit, you won’t make a profit either!

 

High street properties are the safer if more expensive choice; however there is greater risk and reward to investing in sub-prime locations, which can have better yields. You will find it harder to get viable tenants however; you need someone whose business will attract customers away from more central areas.

 

·         Industrial

Industrial property tenants typically have a large workforce and frequent incoming and outgoing deliveries.

 

That makes transport networks especially vital, and you also need to think about the available parking space and delivery areas as well as the available workforce in the area.

 

·         Office

 

Office tenants can vary a lot in their requirements, but the one thing every office needs is a high-speed business Internet connection.

 

You are unlikely to find a property without this these days but it always pays to check, as they can cost £1000s to install in some locations, or may not be possible at all.

 

When investing in either industrial or commercial property, it is also important to think about what type of business is likely to rent your space and any special requirements they might have.

For example, areas with strong Internet and phone networks tend to see lots of call centre offices. These have much larger workforces than other businesses interested in office space; does your location have the transport links and parking space to accommodate that?

Whether you are investing in commercial or residential property there are 3 key questions you need to ask yourself before settling on a location, read my recent article on this for what you need to know.

The most important point to remember about the auction is…

 

Don’t get carried away!

 

There is always another auction and another property.

That doesn’t mean you should hesitate forever, but if you have done your homework and know how much you can spend on a property for a successful investment, don’t keep bidding past that point!

 

Too many people get tunnel vision at the stage and end up trying to ‘win’ the auction, rather than make a sensible investment.

 

Don’t get emotionally invested in bidding!

 

While it is possible to exit a bid after the auction, it will be difficult and expensive and could damage your reputation with the seller or auction house.

There is no good reason to put yourself in this situation!

 

Watch this quick video for some more tips on keeping a level head at auctions.

Tenanted or untenanted?

First and foremost, you will find it hard to get a mortgage for an untenanted property.

Untenanted properties have more uncertainty attached to them since you still need to find a viable tenant, whereas a tenanted property offers the security of immediate returns.

Lenders prefer to avoid commercial properties tenanted by pubs, restaurants and nightclubs, as these businesses often have relatively short lifespans and so are seen as less secure investments.

First and foremost, you will find it hard to get a mortgage for an untenanted property.

Untenanted properties have more uncertainty attached to them since you still need to find a viable tenant, whereas a tenanted property offers the security of immediate returns.

Lenders prefer to avoid commercial properties tenanted by pubs, restaurants and nightclubs, as these businesses often have relatively short lifespans and so are seen as less secure investments.

When it comes to the bidding process itself, everything should be fairly simple – just keep bidding up to the maximum you calculated beforehand.

Some investors prefer to sit at the front to be close to the auctioneer or at the back in order to see who is bidding on what, I always recommend sitting at the back in order to gauge the room.

 

Finally, remember that if your target property’s reserve price was not met, there is nothing stopping you from approaching the seller after the auction.

You already know they are shooting for a quick sale, and someone else might have the same idea, so talk to them at the earliest opportunity!

If you have any students in your family you will know how critical the Internet connection can be for them.

Think about:

·         An inclusive or subsidised Internet package. Having their internet bill included in the rent is one less thing for your tenants to think about, and a good connection is a selling point!

·         Speed. A good rule of thumb is at least 10 Mb/s. DSL Checker is an excellent resource for fact-checking providers’ claims about their connection speeds.

·         Reliability. Simply Googling Internet reliability in your location should tell you enough here. If you find dozens of complaints of outages or poor speed, save yourself the headache as these issues can go on for years.

It is smart to consider the Internet connection even if your tenants will be arranging the package themselves.

Buying a commercial property

Now that you have found a property in a great location, it’s time to buy!

One question I get asked a lot by new property investors buying a property is how big should your portfolio be? We talked about this in my interview with David Wagner which you can watch here, as well as find the full interview on YouTube.

Now that you have found a property in a great location, it’s time to buy!

One question I get asked a lot by new property investors buying a property is how big should your portfolio be? We talked about this in my interview with David Wagner which you can watch here, as well as find the full interview on YouTube.

Managing a student property

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

Choosing a student property

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

 If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

While some commercial properties are sold at auction, most are sold via private treaty much like a residential property.

As with any other property, you need to get a full inspection and survey of the property to identify any structural issues or other problems. If the property is already tenanted then in theory there won’t be any issues here, but you need to check anyway.

The inspection should also cover all of the property’s services such as water, electricity and heating. Again, these should already be in good working order if the property is tenanted but if it is untenanted then it is better to find these problems before you buy in case improvements are needed.


At Premier Property we ALWAYS get answers to these 5 questions:

1. Does the property have valid energy performance, gas safety and electrical safety certificates?

2. When were the last safety checks carried out?

3. What fire safety measures have been installed and are they fully functioning?

4. Does the property require a licence and what are the details?

5. Are there any local council restrictions about the type of let that is permitted?


You should also ask for the seller’s cashflow statements to make sure the property has been profitable for them.

Just starting out on your property investment journey? Make sure to avoid these key mistakes that could stop you from becoming a successful property investor!

Got any commercial property investment tips you’d like to share, or a question you’d like to ask your fellow property investors? Get involved in the discussion in the comments section below!

Got any commercial property investment tips you’d like to share, or a question you’d like to ask your fellow property investors? Get involved in the discussion in the comments section below!

Now that you’ve got your new property, it is time to start maximising your returns on investment. Read my recent article on maximising the value you add to your property for everything you need to know on this.

 

If you have any questions about your first property auction, or tips to share with your fellow investors, join the discussion in the comments section below!

Looking for more tips on furnishing your property? Have a read of my recent article on adding value to your property investments.

The basics of managing a student property are the same as any other property, but there are a few extra things to think about here.

Make sure the property is clean, well-maintained and has robust furniture and fittings. Students are not known for taking good care of their accommodation!

You will probably be re-decorating on a pretty regular basis so keep it simple and don’t splash out.

On that note, get landlord’s insurance with good cover for damages. Although the parents or guardians of students usually make reliable guarantors, make sure the insurance also covers lost rent.

When it comes to providing kitchen appliances, anything that saves your tenants time is a major selling point. The big three every student looks for are:

·         Microwave.

·         Dishwasher.

·         Washing machine.

You definitely want to provide all three if you have the space.

Student lettings agents are where the most tenants can be found. With a lettings agent you get the assurance of referenced and credit-checked tenants, and it saves you the trouble of finding tenants every year.

Advertise all year round. It used to be that student landlords could take advantage of inflated rent prices during the ‘Christmas rush’, but more and more students are disregarding their University’s advice to find a house before Christmas in search of a better deal.

If you want to get started investing in student accommodation, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1st. You NEED to be prepared for these!

The basics of managing a student property are the same as any other property, but there are a few extra things to think about here.

Make sure the property is clean, well-maintained and has robust furniture and fittings, as students are capable of inflicting significant wear and tear on a property. You will probably be re-decorating on a pretty regular basis so keep it simple and don’t splash out.

On that note, ensure the landlord’s insurance has good cover for damages. Although the parents or guardians of students usually make reliable guarantors, make sure the insurance also covers lost rent.

Time-saving kitchen appliances such as a microwave and dishwasher add a lot of appeal to a student property.

Renting through a lettings agent rather than privately is generally a good idea as you will have the assurance of knowing your tenants have been referenced and credit checked, as well as reducing the amount of hands-on time you have to spend finding new tenants each year.

Students are usually pressured by their universities to find the next year’s accommodation before Christmas, but many savvy students know to avoid the higher prices of the ‘Christmas rush,’ so advertise your property throughout the year.

Outside the Property Market

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.


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