Do you have spare capital that you would like to set to work for you? As the economic environment continues to sharply shift, you need to keep a clear eye on the associated changes in your investment options.
In the past, you might have decided to abide by the old adage of ‘safe as houses’, but the tide has turned on buy-to-let investments in the last couple of years. New legislation has included less favourable tax rules for landlords as well as tougher rules for new borrowers. On top of that, a sluggish market has left many existing landlords looking to sell their properties. Indeed, the National Landlords Association estimates that 20 per cent of landlords plans to sell one or more of their properties in the next 12 months.
So, if property is losing its appeal, where else should you turn? Which investments are more attractive right now?
We live in a turbulent world in 2017. A single speech by the Prime Minister about Brexit or an errant tweet from President Trump is all that’s needed to send a currency into a mild panic. It’s in this environment that currency investors can earn their corn. Currency is traded in pairs, so the art here is learning which ones will grow in comparison to another. It also means that you could benefit from a fall in the pound, for example. It might take you a while to learn how to trade forex, but the returns could be considerable.
Peer to peer lending
You can choose to use your money to help ‘crowdfund’ an up and coming business. This is managed for you through a lending platform, with borrowers vetted before they can access to your cash. Sites offering this service do take a fee – but they still offer a better rate than banks for both borrower and lender which is why they’re increasingly attractive. Some firms can deliver returns of higher than seven per cent, but even a modest investment can deliver two to three times the amount of one of the better savings accounts on the market.
Real estate funds
The FTSE 100 has performed strongly over the first half of 2017, but this means you might well have missed the boat on this and a fund wedded too closely to this index might be due a downturn. Instead, look at global real estate investment trusts (Reits). These are a pick of choice for Jacob Vijverberg of Kames Capital, and run buildings to generate an income for investors. Vijverberg favours funds which run hotels or properties used for logistical purposes – such as the huge warehouses relied on by the likes of Amazon.
Houses, after all
We started by looking at the issues facing buy-to-let investors. But that doesn’t necessarily mean that you should abandon the housing market entirely. It might well make sense to invest in housebuilders rather the houses themselves, especially if this is a market you have some experience in. As Ross Clark of the Spectator notes: “Over the past decade housebuilders’ shares have been a supercharged play on the property market. Even in the hottest of hotspots you would have been better off buying housebuilders’ shares than buying property directly. Over one, three and five years the shares of every housebuilder have comfortably outperformed the value of the products they build.” Clearly shares carry a risk but, unlike properties, they require less of a commitment up front and are easier to move on should things move downwards.