As set out in previous articles one of the five aspects that makes investing attractive is property revaluation in London.

Revaluation means the increase in the nominal value of a capital asset over time, by virtue of automatism or the trend of certain indices. In the more specific meaning of property revaluation, it means the result of market index appreciation, resulting from the supply/demand ratio.

The supply/demand ratio expresses a trend over a given time period that is the consequence not only of actual market trends, but also of direct or indirect exogenous factors such as government incentives.

A fundamentally important consideration is that real estate investment, unlike other types of investment, should be viewed from a medium- to long-term perspective.

The graph below shows that over the last 15 years, real estate in the London metropolitan area has increased by about 105 %.

–Data :

In fact, if we consider the average value of a property in the London metropolitan area, we start from a value of £232,422.00 recorded in January 2005, to an average value of £476,588.00 recorded in January 2020.

This comparison of values makes the investment not only remunerative but also safe as property appreciation in London is constantly increasing and this explains the fact of the existence of leveraged products, such as taking out a mortgage with the payment of interest only, leaving the capital share at the end of amortisation. The same capital share can thus be paid off with the margin resulting from the revaluation.

Next we will analyse the regulations governing eviction procedures applied to real estate leases.

The aim is to be able to answer all the questions raised by investors during the analysis.

All the above data are taken from and can be verified at: http://www.gov.uk/check-house-price-trends

A discussion of the eviction procedures in force in England as applied to tenancies of immovable property where there is an insolvent tenant is of paramount importance for investment appraisal.

Eviction is defined in law as the action by which a person, by virtue of a pre-existing right, legally dispossessed the person to whom a right in rem, in this case the right of abode, has been transferred.

An important aspect is that such procedures have a variable duration, ranging from two months to four months.

-Procedures:

There are two types of procedures which can be distinguished into:

(a) SECTION 21 and

 b) SECTION 8.

The choice of procedure depended on certain conditions, such as contractual clauses or missed deadlines.

However short the procedures may seem, it is very important to choose the right section of applicability, as it could be challenged and cause the whole procedure to be cancelled.

If the tenant is insolvent, i.e. for three weeks of tenancy, the eviction and possession procedure is started. This procedure can be started online by providing the required documentation and paying the sum of £325.00 for the fees.

Once a hearing has been set, within thirty days, the judge will decide the date for the release of the property, which can be within 14 or 28 days . At the same hearing, the judge will decide on all actions to protect the landlord’s claim.

In the event that the tenant does not respect the date specified by the judge for the release of the property, the landlord has two courses of action to obtain possession of the property . The actions are as follows:

Warrant of Possession through a bailiff at the ordinary court;

Writ of Possession to the Supreme Court with the intervention of police personnel to evict the property.

It should be emphasised that there is no legislation preventing actions for eviction and eviction of the property, due to social or personal conditions of the tenant.

-Conclusions :

In other words, there is legal certainty and, above all, certainty of justice. This legislation is of paramount importance for the overall assessment of property investment in London or England.

The entire legislation and its procedures can be found at : http://www.gov.uk/evicting-tenants

A further of the five attractive aspects of making an investment in London is related to the property rental regulations in force in England.

– General Provisions:

A first note that, as a substantial difference with Italy, is that rents are expressed in weeks.

For example, a flat rented at 400 GBP per week does not mean that you receive a monthly rent of 1,600 GBP, but rather a rent of 1,733 GBP. This result is derived from the weekly rent multiplied by the number of weeks in a year, i.e. fifty-two.

–Contracts:

The legislation does not place any limit on the maximum duration, but only on the minimum duration.

Thus real estate may be leased for a minimum duration of one year and with certain characteristics. One of these, where the parties agree, is inherent in the break clause.

A break clause means the possibility of both parties to terminate the lease before its natural expiry. The exercise of the break clause is contemplated in the contract itself, where the terms for which either party may exercise it are set out; this clause allows for greater flexibility in the contract signed between the parties.

–Rent payments:

Rents are values derived from the supply/demand relationship of the property rental market, as are rent updates. That is, these rents are not linked to consumer index updates, but remain unchanged throughout the term of the contract.

When the lease expires, the rent will possibly be renegotiated as a result of the market value at that time.

In the lease there are certain obligations and limitations for the parties. The landlord is obliged to carry out all ordinary and extraordinary maintenance, where necessary, to the rented property.

The tenant may not make any changes to the property, such as decorating the walls or affixing furnishings to the walls.

–Features:

It follows from this that the landlord, if he does not live near the property or due to lack of time, will have to mandate the management of the property. The manager will be in charge of rent collection, maintenance and all related activities.

The performance of this mandate shall be governed by special management contracts for an economic consideration. This fee paid by the lessor becomes a 100 % deductible cost for the purposes of determining the taxable income on which the tax due to the Treasury (HMRC) is calculated.

Another feature is that within the rent any condominium charges (service charge) are contemplated, i.e. included. Both the condominium expenses charged to the tenant and those charged to the landlord are deductible elements in their entirety.

–Conclusions:

It should also be noted that in England there are no taxes on the ownership of real estate.

The full legislation governing property leases in England, including all its implementations to date, can be found at: http://www.legislation.gov.uk/

Following the recent global economic freeze, with different repercussions in different countries, the UK is considering an exemption from Stamp Duty Tax.

In fact, many trade associations, such as the National Federation of Builders and the Royal Institution of Charted Surveyors, are expressing to the Boris Johnson-led government the need for a suspension of the tax payment.

Previous articles have explained the same, its applicability and exceptions on a case-by-case basis; the aim of the suspension is to revive the property market after the lockdown.

Events:

Immediately after the UK’s exit from the European Union, the London property market had seen strong increases in terms of transactions and demand; this was due to the fact that the period of uncertainty was finally over.

Unfortunately, with the advent of Covid-19 came a total freeze, one would say on the surface, but in reality this is not the case. In fact, many foreign investors expressed interest in investing in London during this period as well.

Certainly, taking advantage of the uncertainty of the future to be able to extract better prices than a few months ago, the recent acquisition of the Ritz Hotel by a direct family member of the Emir of Qatar made headlines.

The requests from investors are also for the purchase of single property units in exclusive areas of London, such as Mayfair or Knightsbridge. We can say that history teaches and repeats itself.

The government is currently putting in place further measures to address the needs of the country and the Stamp Duty Tax exemption for home buyers will almost certainly be approved. Its subjective applicability and time limit will have to be seen.

Indirect confirmation comes from the fact that, despite the period, the government has let the EU know that it must resume negotiations on the trade agreement and that it has no intention of extending the transition period; this is with the aim of being able to give new and certain rules to all investors from 1 January 2021.

Next we will discuss the strategies and government reform acts, under consideration in Parliament, which aim to make the UK even more attractive from an investment perspective.

Some of these can be found at: http://services.parliament.uk/bills/

The UK economy context:

In the aftermath of the global pandemic better known as Covid-19, all the world’s economies are finding themselves assessing the consequences on the economic system.

In this particular case, the UK economy is contracting in nominal terms and beyond.

The lockdown, or freezing of almost all activity in the country, began on March 23rd but, for a fortnight, there had already been a reduction in the flow of people on public transport and the cancellation of many jobs.

Data:

The UK’s Treasury and Economy Ministry has published data for the first quarter and it shows :

GDP contraction of 2 %, the largest recorded in the last decade;

consumption contraction of 1.7%.

Compared to the rest of the world, these figures place the UK among the countries that have suffered the smallest contraction in GDP so far, especially when compared to the Eurozone, which recorded a 3.8 per cent contraction in GDP.

Added to this is the fact that the Eurozone countries imposed the lockdown, on different dates.

The government’s response to the lockdown of the economy caused by Covid-19 was not slow in coming. Indeed, it has responded with various interventions and above all with an initial economic manoeuvre of GBP 350 billion to support the economy.

These responses were financed by the Bank of England and the placement of government bonds on the market, offering an interest rate of 0.6%, given that demand was three times greater than supply at the time of placement.

Fundamental is the role of the Bank of England, which acts as guarantor for loans granted to medium and large enterprises.

While for small businesses, the banks provide funding that is 80 % guaranteed by the government, with the remaining 20 % prohibited by law from requiring further guarantees.

News :

Specifically, the London property market has suffered a setback, although according to a report in the London Evening Standard, according to data published by the Land Registry, prices in the city of London have recorded an overall increase of 4.7 % compared to the same period last year. Certain areas of the city, on the other hand, experienced much larger increases.

For example, the Borough of Kensington and Chelsea recorded a price increase of 14.6%, the Borough of Westminster recorded an increase of 13.5%.

The consequences of Covid-19 are yet to be fully deciphered and implemented in the real economy. However, to date it can be said that the UK has responded in a timely manner with action to support the economy.

We will see what the impact will be on other countries’ economies and what their recovery rates will be.

A final piece of news worth noting is that the Japanese car manufacturer Nissan has announced plans to shift production from Spain to the UK.

All economic data for the first quarter can be found at: https://www.ons.gov.uk/economy/