‘Bricks and mortar’ has, for decades, been a guiding principle for savvy investors looking to make a return. While property investments do not always promise the kind of stellar returns that can be earned on riskier investments, they also do not come with the downsides.

Over the long-term, all the evidence suggests that property is the best means by which to grow your money. In fact, while data recently published by Heathstone Investments reveals that, over the course of one year, returns on property investment are eclipsed by those in equities (7% and 12% respectively) – the story is a different one over the longer-term.

Over 10 years, investments in property and equities both return around 8%, while over 15 years, property investments return nearly 12%, while equities return less than 8%. So, while property investment does not always contain the highs and lows of other investment, for those looking to make a stable and long-term return on their money, the data suggests it is the preferable option. With political uncertainty having rocked stock markets and equities in recent years, and with further potential turmoil on the horizon, the case for investing in bricks and mortar has never been stronger.

For many years, a staple choice for those looking at property investment has been the buy-to-let sector. There are an estimated two million buy-to-let investors in the UK, invested in a private rented sector which is home to more than five million people.

The dynamics behind this market have traditionally been strong, and continue to be so as rising property prices mean younger people spend more time in privately rented homes, prior to one day getting on the ladder themselves.

Property taxation

Housing affordability has become a political issue however and the government in recent years has attempted to discourage investment in buy-to-let by raising the level of stamp duty payable on second home and buy-to-let purchases, as well as reducing the amount of tax relief landlords can claim on profits earned through buy-to-let investment.

As a result, increasing numbers of property investors are now looking at the other end of the market – luxury property. There is good reason for this growing interest. Recent data from Christies International Real Estate reveals a market currently at record levels with the world’s top ten reported property sales all priced above $100 million for the first time. 

With property investment funds promising double digit returns on luxury investments, combined with a dwindling number of dividend paying shares available to would be investors, it is easy to see why this new investment class is growing in an era where interest rates and returns on savings around the world remain subdued.

Unlike traditional property investments however, luxury investments may often require more initial capital. While this can be seen as a positive in that greater investment will lead to greater returns, it can also be daunting for somebody new to the market. Furthermore, alongside the question of what to invest, there is also the question of where.

As UK residents are subject to capital gains tax (CGT) on the disposal of worldwide chargeable assets, overseas homes will therefore fall within the scope. Andrew Constable, tax partner at Kingston Smith, said: ‘Where a property is used by the owner as his or her home (even if it is also let out), consideration should be given as to whether it is, or should be elected as, the individual’s main residence for the purposes of private residence relief.

‘If so, then on disposal some or all of the gain would be exempt from UK CGT (although clearly the benefit of claiming private residence relief will be offset to the extent that local tax is charged on the gain). The key point to note in this regard is that a property cannot be eligible for private residence relief in respect of a UK tax year where, broadly, the individual either was not tax resident in the territory in which the property is situated, or did not spend at least 90 days in the property.’

Eddie Sikora, Director, the Luxury Property Show, said: ‘The luxury property market is growing exponentially at the moment with an unprecedented number of sales topping the $100 million mark. As the old adage goes however, early bird catches the worm, and now really is the time for those thinking about investing in this market to take the plunge.

‘Whether you’re a seasoned investor or a complete novice, there are always questions to be considered and contacts to be made. Over the course of the last decade the show at the Olympia has become a central event in the luxury property calendar, and is where people go to develop a better understanding of this complex market and get key insights into the next property hotspot. It’s an opportunity for investors, developers and the real estate community to come together and discuss the key trends and, more importantly, to match those looking to invest with the right property for them.’

The Luxury Property Show on 27 and 28 October at the London Olympia allows potential investors to network and explore potential opportunities. More information is available here.