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What investors need to understand and consider during a recession

Article Source: HJ Collection

UK property continues to perform There is no question that the UK is going through difficult times. The soaring cost of living and the interest rate rises to tackle it, have not only knocked business confidence, but also led the Bank of England to announce that it expects a recession in the fourth quarter of this year. The economic situation is a serious one but that does not mean there is not profit to be made from smart investing. It is just a question of how you go about it! A great first step is to understand what to put your money into, and that should be an area where demand outstrips supply, even in the face of a downturn. Obviously in the UK that means property and the market’s resilience can be demonstrated by its resistance to the impact of Brexit, the coronavirus and even extensive stamp duty changes! It is fair to say that the chronic housing shortage is one of the biggest challenges our country faces and has resulted in rapid house price inflation. The latest Halifax House Price Index reveals that house prices in August 2022 were 11.5 percent higher than the same month in 2021. Over the last year, the rate of monthly house price inflation has averaged around 0.9 percent, bringing the average UK house price to a new record high of £294,260. While some surveys suggest a cooling may occur, there are certainly no signs of the market running low on steam. Neither should this be the case given the recent appointment of Liz Truss as Prime Minister, whose first statement on the steps of 10 Downing Street was to outline her mission to “tackle the issues that are holding Britain back”, so as to "transform Britain into an aspiration nation". In order to put the UK economy on a more even footing and fully unleash its potential, Truss is clear that investment is needed across the country, and much like her predecessor Boris Johnson, housing development will be integral to this. Developers are enjoying the full support of government While Truss has yet to come out with a directive as memorable as Johnson’s “Build, Build, Build”, which kickstarted some of the most radical reforms to the UK’s planning system since the Second World War, she is very much treading along the same path. Deregulation and tax-cuts are the means by which she plans to tackle development delays, rather than what she calls “Soviet top-down housing targets”. An obvious reference to the Conservative’s 2019 manifesto pledge of building 300,000 homes a year by the mid-2020s. A target which her party have unofficially dropped, when former housing secretary Michael Gove stated in May, “It’s no kind of success simply to hit a target if the homes that are built are shoddy, in the wrong place don’t have the infrastructure required and are not contributing to beautiful communities.” Instead, Truss reportedly wants to “rip up the red tape that is holding back housebuilding” by tackling planning rules such as “nutrient neutrality”, which has prevented a number of housing developments across the UK from being built, because of its effect on land and other development costs. The House Building Federation (HBF) estimates that doing so will immediately kickstart the development of over 120,000 homes which will have a substantial impact on tackling the ongoing housing crisis. Amongst other announced measures Truss plans to further boost commercial and residential development by reducing planning restrictions for local authorities who have identified suitable sites for redevelopment, including in brownfield areas, which were once used for industrial purposes but now lie vacant. It would appear then that the best days of the property and construction industries lie ahead given the public need for housing, and the political willpower in place to make sure it happens as quickly as possible. Property is a great investment if done correctly Investors naturally need to be cautious during an economic downturn, after all, nobody wants to fritter their hard-earned money away. With consumers expected to cut back on spending because of cost-of-living increases, the earning potential of companies will be severely impacted, causing the markets to become extremely volatile. This would certainly increase the risk of huge swings in share prices, upturning an investor’s share portfolio in seconds and leaving them seriously out of pocket. For high net worth and sophisticated investors, there can be no questioning the ongoing strength and security of bricks and mortar. That is why property bonds are an excellent option for anyone looking to minimise investment risk, as well as enjoy attractive, high fixed returns. Especially if they prefer not to have the responsibility of property ownership such as managing tenants or paying rising council tax costs. For those not aware, property bonds, which are also known as loan notes, are a form of alternative investment issued by property developers to raise funds for the land purchasing and construction costs involved with a planned development. They’re generally issued for a fixed term and set for a time period that allows the developer to complete construction and generate the returns owed to the investor. Unlike common property-backed loan notes however, HJ Collection has a unique, managed property bond portfolio, comprised of a number of leading contractors and developers. Not only then do investors get a guaranteed fixed rate of return but their investment is recession proofed by our ability to provide maximum diversification over multiple developments. Afterall nobody should want to put all their eggs in one basket during periods of uncertainty. What HJ Collection can offer you It is clear that ongoing property price rises, driven by demand will be the only thing we can be fairly confident of in the potentially turbulent months ahead. Investors should feel assured by this, and the fact that the government is creating even better conditions for the property development industry to thrive in and succeed. Already HJ Collection is ahead of the curve, and we are in a privileged position to be able to offer our clients a range of exciting developments in popular locations across the UK. Take for example our Heathside development in London which is due for completion in Q4 2023. The 106 open plan, high quality homes we are offering, range from studios to two-bedroom apartments and will offer investors a gross yield of around 4.5%. If you are looking for something a bit further north, our Preston development is just one of a number that will be of interest. We are delighted to be able to offer our clients a development project consisting of 200 high-end, one-to-three-bedroom luxury apartments, in the centre of one of the North West’s fastest-growing cities, which will also offer a projected 81% ROI over five years. Given we have a GDV over £76m and we have created over 650 homes, we are confident that we can help you look towards the future with ever increasing confidence. For more information about our managed property bond portfolio or any of our developments, please give us a call and our team of specialists will be happy to assist you.