Half of Scottish investors no longer view property as a good investment

According to a new survey of over 1,000 UK investors and 500 high net worth Individuals commissioned by Rathbone Investment Management, the changes have led to many investors now re-evaluating the cost-effectiveness of property as an investment.

Just a quarter (25 per cent) of Scottish investors with over £100k of investible assets consider property one of their main investments.

The survey also showed 14 per cent of the high net worth Scottish investors currently owned buy-to-let properties; however, just 3 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.

Investing in property has been a popular investment option across the UK. 49 per cent of Britons when surveyed by the ONS said that 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.

Nearly a third (29 per cent) of the HNW investors surveyed had accumulated their wealth through property, while 14 per cent said they were invested in real estate.

Affordability has also been a cause for concern in the property market, with house price growth continuing in the majority of regions in the UK, whilst low interest rates and limited wage growth has prevented many from being able to access or move up the property ladder.

Evangelos Assimakos, Investment Director for Rathbones Edinburgh, said: “Recent changes to the tax and regulatory treatment of buy to let property have caused investors to take a step back and assess the viability of these investments.”

“Whilst it’s understandable that property, and in particular residential property, has been a popular investment in the past, it’s now making less and less sense. Not only is property potentially a high-risk investment due to a lack of geographic diversification but now, returns are being impacted further by the increased rate of tax and changes to past incentives for buy-to-let investors. Property investments require a relatively 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 thinking about investing in property, should make sure to carefully assess the impact of a less benign tax landscape on their expected returns and, if the numbers still add up, consider building a diversified portfolio of complimentary asset classes and investments that would afford them better levels of liquidity and alternative sources of income and capital growth.”