Tough mortgage lending and higher taxes, along with economic and political uncertainty, are making some people reconsider investing in the buy-to-let market. However, in truth, the property continues to be a solid longer-term investment.
With customers still receiving an appalling return on their savings from building societies and banks, people still continue to invest in residential property as a way of boosting their income, especially in the current climate of increasing rents, high demand from renters and low borrowing rates for mortgages.
Recent research, studying over 50 years of property investment, has shown that investors in the residential sector, on average, see a profit 83 per cent of the time.
British Pearl, the property investment platform, has analysed common five-year investments over a 50 year period, and discovered that in most scenarios of investment periods, investors would have seen a return on their money. The study also found that the appreciation of average house prices was over 58 per cent between April 1968 and April 2018, on property invested in for five years. Property prices fell in only five periods, reflecting a success rate of 89.1 per cent.
During this analysis, British Pearl also factored in estimates for mortgage payments, interest, legal fees and stamp duty. This further identified three years in which property investors would have lost money, which gave a 82.6 per cent success rate. The best return on property investment on average would have been seen by a landlord purchasing property in 1969, who would have experienced a gain of over 148 per cent, at £4,589.
The steepest decline in the private rented sector property prices occurred from 2007 to 2012, when UK properties slumped by an average of 7.9 per cent in value. However, the market promptly recovered in the following years.
British Pearl’s investment manager, James Newbery, has stated that the research has demonstrated that investors who hold onto their property portfolio during times of political and economic upheaval can still expect to win, in terms of profitability. History has demonstrated that property investors who weather the storm still make healthy returns from investments, which also presents a limited risk in terms of loss.
Whilst the analysis has emphasised that property is a solid investment, returns can be boosted by identifying areas of high rental yields, regional trends and careful property choices. The UK property market has a good history of returns, with high demand for housing making property an extremely attractive investment from the asset classes available. The market has shown that it rewards investors who do their research, diversify their portfolio and remain level-headed.
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