The high interest rate environment and the stagnation experienced by the real estate industry in Israel, alongside the turbulence of the capital market, leave many investors “on the fence”. However, there are those who choose to channel their investments beyond the geographical borders of the State of Israel. Real estate investments in England have high yield potential and embody a variety of advantages that have made them highly sought after by Israeli investors.
Unmanaged and invested equity is capital that may lose its value every day. The continued increase in interest rates in the economy has not succeeded in making saving money in the bank attractive, mainly due to galloping inflation and the soaring CPI. The real estate market is considered a safe investment channel open to investments by experienced investors and real estate tycoons, but also invites and makes a variety of investment channels accessible to private capitalists who wish to enjoy a safe investment, yielding yield and/or the creation of a permanent passive income. The real estate industry in Israel and around the world relies on a simple economic principle that is responsible for the almost absolute success and growth in the industry, the principle of supply and demand. The greater the supply relative to demand, the lower the price of the product, while limited supply and high demand will lead to a rise in prices, until they are completely cut off from their economic value, a phenomenon also known as a bubble. In the real estate industry, the gap between demand and supply is growing, with demand rising as a result of an increase in the size of the world’s population: advanced health systems that lead to an increase in life expectancy, an increase in the birth rate, an increase in the divorce rate that leads to the splitting of family units into two housing units. This is in addition to the supply that remains limited, mainly because the supply of land, which constitutes the raw material for real estate, is limited. The limited supply of land, alongside the growth in its population and real estate needs, creates a one-way equation that, according to forecasts and the assessment of many experts, perpetuates the continued increase in real estate prices worldwide, in the long term.
The choice to invest in real estate abroad in general, and in England in particular, is an insight of investors that in the twenty-first century the world is global, and geographical limitations are no longer a barrier to choosing the optimal channel for making capital. By properly analyzing options and data, and taking advantage of benefits and advantages granted by the British government to foreign investors, it is possible to significantly increase the average rate of return on a similar investment in Israel, and enjoy a variety of investment channels and options, customized according to the investor’s needs, capital and goals. At the same time, real estate investments in England are not a shelf product, and planning such an investment requires familiarity with the local market, real estate legislation and regulations, taxation and other characteristics.
Real estate investment abroad will be based on a number of leading principles:
-Economic resilience and growth of the target country
-Examining market and local economic behavior in times of crisis
-Market Analysis: Real Estate Purchase Costs vs. Local Rental Costs
-Real estate taxation applicable to investors
-Comparison of growth forecasts and returns relative to local real estate investments
England: Local Economy, Data and Growth
In examining real estate investment options in England, we will examine the UK and its economic strength over the past decade, with an emphasis on the behavior of the real estate industry and periods of crisis. The UK is among the strongest and most stable countries in Europe, whose withdrawal from the European Union in 2020 was a testament to its economic strength and independence, and relied on the volume of independent trade, exports, and tourism, which gave it the status and economic strength of a leading power in Europe. Over the past decade, the UK has presented impressive data, economic growth of 6%-8% a year, which also affected the real estate industry, which, apart from a slight blow to the wing in 2021, during the global coronavirus crisis, continued to soar and present average growth figures of about 12% per year.
Among the notable advantages that have made England a popular destination for foreign investors:
As noted, the UK shows consistent growth and economic resilience that is evident even during periods of global economic crises, and is a safe destination for investors.
Accessibility – Overseas investment is also important to manage responsibly, to examine with critical eyes, in a physical tour of the property and the surrounding area, and not based on publications and catalogues. England is only a 5-hour flight from Israel, the language spoken there is English – an international language spoken by Israeli investors, which makes it easy to arrive, conduct and access the vast amount of information required.
England is one of the most visited countries in the world, which strengthens the country’s economy, and provides investors with a variety of real estate investment channels.
England is home to some of the world’s leading academic institutions, attracting students of high socioeconomic status, from a variety of countries across Europe and around the world. A large number of students creates a demand for small housing units and high and stable rental prices in academic cities. These properties are built quickly and to non-prestigious standards, are sold at a relatively low cost, and provide high returns, stable tenants for periods of 3-4 years on average, and an increase in demand that increases every year.
Most real estate investments are based on a combination of equity and external financing, with banks in Israel not granting mortgages for real estate investments abroad, in assets that they cannot mortgage in their favor as collateral for a loan. Obtaining financing in a foreign country is also not an easy procedure and is usually impossible, but a policy of encouraging investment in England provides foreign (Israeli) investors with a variety of financing options from local financial institutions, amounting to up to 70% of the value of the property and with convenient and worthwhile repayment terms.
The British government has a strategy that supports the regular flow of foreign money into the country, through lenient tax policies and tax benefits for foreign investors. For foreign investors in the country, it is important and recommended to seek the assistance of a local tax advisor for advance planning and to exhaust tax reliefs and benefits.
These advantages, along with other characteristics, have created a real estate market that provides foreign investors with a variety of options and accessible investment tracks, and high rates of return relative to other solid investments and real estate investments in Israel.
It is important to note:
Another promising channel for real estate investments in England is commercial real estate, which offers a variety of investment options in commercial properties, tourist areas and commercial and industrial areas, in various districts.
The reporting of real estate transactions in England and the income in respect thereof includes the possibility of reporting recognized expenses, such as: legal costs, management and maintenance fees, renovations, building insurance, accountant’s fees and other expenses, which are reduced from the price of the property for tax calculation purposes.
Proper planning of real estate investment is based first and foremost on choosing a location, and in England, too, gaps can be found in property costs, rents and overall yield between different cities and regions. SDB provides its clients with a variety of investment properties in different parts of England. The properties are skillfully and responsibly located by the company’s teams, which combine local real estate and financial experts who bring in-depth familiarity with the characteristics of the local market in England and areas of demand. Alongside the local experts, a professional and skilled Israeli team operates that knows the Israeli investing public and their needs, and provides a package of services and personal accompaniment, on the way to creating an investment channel with high growth potential and reduced risk.