Investors have had a confusing 2020 so far, due to the emergence of COVID-19 and the uncertainty it brings to every sector.
Property has always been one of the most popular assets, but is it still a good investment in the current climate?
There is no definitive answer to this, because - like with all investments - your capital is at risk, and investment decisions should be made based on your personal circumstances.
However, it is evident that property has proven itself to be a resilient sector throughout the current pandemic.
Though the housing market came to a halt earlier in the year due to Coronavirus-related restrictions, its bounce-back after restrictions were lifted - dubbed the housing mini-boom - is promising.
What the housing mini-boom means for investors
Pent up demand and the desire for more indoor and outdoor space - after the national lockdown meant many people were confined to their homes for both work and leisure - which in turn caused the housing market to thrive.
Zoopla’s UK Cities House Price Index Report found that housing demand had increased by 88% in the week after the housing market reopened in May, and UK mortgage applications have now hit a 12-year high.
Property investors in the North appear to have particularly promising prospects, as the North looks to be leading the housing market boom with house prices continuing to rise.
This, of course, is all good news for property investors. And in July, new-build enquiries were at a record high after the Chancellor of the Exchequer announced the stamp duty holiday.
This is especially positive for property-backed IFISA investors, whose potential returns are generated through the development of high-quality, new-build homes.
But it’s not just those looking to purchase a home that have been encouraged by the COVID-19 lockdown to make the move, the rental market has also seen an uptick.
However, leading property portal Rightmove found that renters now favour two-bedroom homes over the likes of studio flats.
In Rightmove’s list of most in-demand property types for renters, two-bedroom houses are in the top spot for 2020, with three-bedroom houses placing third. Studio flats are now down to number eight, though they topped the list in 2019.
This further exemplifies the newly exasperated desire for more space, and could again be positive news for investors into a property-backed IFISA.
The alternative finance provided by the property-backed IFISA typically supports regional house builders in the development of new homes. By their nature, these house builders are forward-thinking and agile, meaning they can often provide a tenure (for sale or to rent) that is appropriate for the climate, and the area.
For example, Homes by Carlton’s (CARLTON Bonds’ strategic housing delivery partner) Cathedral Gates development - for which CARLTON Bonds provided a £300,000 short-term development finance loan - is mixed-tenure, offering bespoke three and four-bed homes on both a private sale and rent-to-buy basis.
The tenure of these homes has no impact on an investors returns, so investors into a CARLTON Bonds IFISA could potentially receive between 4.75% and 7.75% no matter where the market picks up the most.
Investing into property for impact
For impact-driven investors - those who are looking to make a positive social, economic or environmental impact through their investment decisions - now could be a better time than ever to invest into property.
A strong housing market is crucial to the bounce-back of the UK’s economy, as house building alone supports around 750,000 jobs.
And the housing mini-boom looks to be having its desired effect, fueling the construction industry’s rebound - an industry that contributes £31 billion per year to the economy.
Through supporting regional house builders via a property-backed IFISA, they are in turn able to provide local jobs, employ innovative methods of construction and regenerate communities - helping to drive economic growth and promote health and wellbeing.
Choosing how to invest into property
The traditional method of investing into property, buy-to-let, has faced some hurdles in recent times.
The upfront and ongoing expenses associated with buy-to-let - such as mortgage payments, stamp duty, insurance and property maintenance costs - have long been a drawback for many investors.
And recent tax changes - including the scrapping of mortgage interest relief - mean that the cost of being a landlord has increased further.
These changes have considerably impacted the profitability of many buy-to-let investors’ portfolios, and those disillusioned with rising prices and dwindling tax reliefs may be considering alternative methods of investment into the potentially high-yielding sector.
Unlike buy-to-let, the property-backed IFISA offers a hands-off approach to investing into property.
With often low minimum investment amounts, no ongoing management fees and - most importantly - tax-free returns, the property-backed IFISA could be an attractive option for experienced investors hoping to retain property in their portfolio.
The CARLTON Bonds product is available exclusively to experienced investors who are classified as either sophisticated investors, high-net-worth individuals or professional investors and have the knowledge and experience to make their own investment decisions. Investments are high risk and illiquid, your capital is at risk and returns are not guaranteed. Bonds are not protected by the Financial Services Compensation Scheme (FSCS).