06, June, 2023

Is 2021 the Time to Diversify your Property Portfolio?

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Is 2021 the Time to Diversify your Property Portfolio?
With a confusing and worrying year behind us, there are a lot of questions around property and whether it’s the right time to invest.

After the turbulence of 2020, the new year was welcomed with an abundance of optimism, and the general approach of, ‘it can’t be any worse than last year’. That said, almost four months into the new year, the UK remains in a national lockdown.

However, with a roadmap out of lockdown, prospects for both the economy and the property market are looking increasingly brighter. While investors may still be cautious to diversify their property portfolios, the steady return to some degree of normality in the coming months is becoming more tangible. Not only are we continuing to embark on a promising post-Brexit Britain, but forecasts are now anticipating an economic rebound and increasing property prices.

Based on their ‘Life After Lockdown’ Guide, property developer, SevenCapital, offers insight into why 2021 is, in fact, an opportune time for investors to diversify their property portfolios.

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A Positive Post-Brexit Britain

Brexit has been looming over the property market since 2016, causing great economic and political uncertainty. The news that the UK would eventually be leaving the European Union shook the economy in 2016, with the possibility of a no-deal Brexit, amongst other things, causing the interest rate to drop – leaving it at just 0.25%. Inevitably, this had ripple effects across the property market, in which we saw its growth fall by 3%.

While the concerns surrounding Brexit subsided, it took almost two years for the market to return to pre-referendum level, emphasising the extent of these worries. With Coronavirus spiralling throughout the globe, Brexit has almost been a second thought for many of us over the past 12 months. That said, as 2021 grew closer, and the possibility of a no-deal Brexit increased, there have been significant worries surrounding the prosperity of the economy this year.

What comes next?

However, as we embark on post-Brexit Britain with a free-trade deal, the short-term effects of exiting the EU are not nearly as catastrophic as many had once thought. Although tighter travel restrictions and new legislation is set to complicate right to rent checks, the digital landscape that we are seeing is set to streamline this process for both landlords and tenants. As a result, property investment will remain a stable, straight-forward process for investors looking to start, or diversify, their property portfolios.

Many of the concerns arising from Brexit centred on both Gross Domestic Product (GDP) and the value of the pound. Despite a combination of Coronavirus and Brexit influencing these factors, GDP is expected to grow by 5.5% this year, while the value of the pound remains buoyant against other currencies. With both of these aspects indicating the prosperity of the economy, this growth indicates the positivity of the 2021 forecast.

Both the free-trade deal, and the ongoing efforts to manage the effects of Coronavirus, have propelled the property market, and with the positivity of the 2021 forecast, it is an opportune time for investors to diversify their property portfolios.

A Strong Economic Forecast

If 2020 has taught us anything, it’s that the UK property market is a resilient investment asset. While other investments, such as cryptocurrency, were crashing, the property market was thriving. Not only did the average house price surpass £251,000, but the rental market is in an upward trajectory, with growth reaching 8%.

While the economy faced rising unemployment rates and yet another recession, the property market has continued to make history and provided a strong basis for both the economy and the industry as a whole for 2021.

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The momentum from the Stamp Duty holiday continued throughout the second half of 2020, and went on to sustain the property market throughout January. While uncertainty surrounding an extension caused the growth of property prices to subside slightly in February, the Chancellor’s decision to extend the Stamp Duty Holiday has seemingly restored buyer confidence. Read more in our article, the stamp duty extension explained.

Will the stamp duty extension boost the market?

By encouraging buyers to make the move, this extension has also boosted the opinions of many experts. Savills’ initial 2021 property market report was bleak, to say the least, with property price growth capped at 0% for the year. However, the roll out of the Coronavirus vaccine, combined with the positivity of post-Brexit Britain and the extension to many government schemes, Savills is now anticipating 4% growth in property prices.

This predicted growth in the property market coincides with the overall economic rebound that is expected in the coming months. Although we saw a 9% contraction in GDP we saw in 2020, forecasts are expecting 5.5% growth for 2021, before a full economic recovery in 2022. With a healthy economy and a consistently low interest rate, a sustained demand to both purchase and rent property is inevitable.

The combination of these factors reinforces the opportunities for property investors in 2021; the economic rebound we are anticipating, along with the continuation of the Stamp Duty holiday, will only fuel property prices and sustain rental demand. This dynamic landscape makes for an opportune time for Buy-to-Let investors to diversify their property portfolios, with the reassurance of future growth.

Final Thoughts…

Diversifying your property portfolio can be a daunting prospect, especially after the turbulence of 2020. Many investors may be left waiting for Coronavirus to be a thing of the past, and for the economy to return to full prosperity. However, as we have seen over the past year, economic struggles do not always translate throughout every industry in society.

The property market thrived throughout unprecedented times, demonstrating both its resilience and reliability as an investment asset. With this reassurance, along with the anticipated growth throughout 2021, investors have the opportunity to diversify their property portfolios while the market remains in an upward trajectory.

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