Rathbone  

Rich investors turn their backs on property

Rich investors turn their backs on property

More than half of UK investors no longer view property as a good investment, according to research by Rathbone.

Rathbone Investment Management quizzed more than 1,000 UK investors and 500 high-net worth individuals (HNW) and found many investors are now re-evaluating the cost-effectiveness of property as an investment.

This follows on from recent changes to the tax treatment of buy-to-let (BTL) investments introduced by the government over the past few years, as well as the introduction of new regulations by the Prudential Regulation Authority affecting portfolio landlords.

In comparison, those investors with more than £100,000 of investible assets are slightly less bearish about property, as 38 per cent do not view it as a good investment.

Yet a quarter of high-net worth investors surveyed currently owned buy-to-let properties; however, just 7 per cent planned to increase their portfolio.

Research by the National Landlords Association also reported in January that 20 per cent of its members planned to sell a property in their portfolio in 2018.

Robert Szechenyi, investment director at Rathbones, said: "Recent changes to the tax and regulatory treatment of buy-to-let has caused investors to take a step back and assess the viability of these investments.

"While it is understandable that property, and in particular residential property, has been a popular investment in the past, it is now making less and less sense.

"Not only are the returns now being impacted by an increased rate of tax, but they can also prove high risk investments due to a lack of diversification. Property investments require a large amount of capital to be held in one single asset and landlords will often hold a number of properties within one region.

"Investors who are looking to invest in property, should make sure to assess their risk appetite, look at all alternative options and make sure this property is held within a well-diversified portfolio of investments."

This follows on from April 2016, when the government introduced a stamp duty surcharge of 3 per cent on additional properties.

In addition, the tax relief that buy-to-let landlords could claim on mortgage interest costs has started to be reduced since 2017, and will continue until April 2020 when landlords will no longer be able to claim.

Investing in property has been a popular investment option across the UK.

A massive 49 per cent of Britons when surveyed by the Office for National Statistics said investing in property instead of a pension was the best way to save for retirement.

The popularity of the asset class has largely been due to the high returns that property can generate.

In addition, less experienced investors will often choose property over investing in the stock market as they are more familiar with this asset class.

aamina.zafar@ft.com