house prices high

Property investors who stick out hard times still make great returns

While the country’s housing market will always be subject to fluctuations, those who play the long game rather than exit when things get tough will still see their profits grow.

Taking any five-year period over the past 50 years, UK buy-to-let investments have made a profit 82.6% of the time, according to new research compiled by British Pearl, with house prices going up by an average of 58.6% between April 1968 and April 2018 on properties owned for a five-year period.

There were only five separate periods when average house prices in the UK dropped over the five decades, which represents an 89.1% success rate, and this was adjusted to 82.6% when stamp duty as well as mortgage payments, legal fees and interest rates were taken into account for property investors.

The best and worst of times

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Due to the UK recession of the early 1990s, house price falls were recorded in 1989, 1990 and 1991, followed by further dips in 2007 and 2008 as a result of the global financial crisis. The best profits by investors were made by those who bought in 1969, as they would have made average gains of £4,589 from the 148.6% house price increase seen over the following five years.

Overall, according to the research, buy-to-let landlords and investors who stick to the market and “hold their nerve in the midst of economic or political upheaval” still stand to make impressive gains from their property investments.

James Newbery, investment manager at British Pearl, commented: “While our analysis shows housing has been a solid investment over time, we know that returns can be bolstered with careful property selection, identifying regional trends and areas of rental yield strength.”

Playing the long game

“The message, not just for investors but homeowners, too, is to play the long game,” added Newbery.

“UK property has a track record of returns and, no matter how tempting it is to think prices are unsustainable, the level of demand for housing in Britain makes property one of the most attractive asset classes on an ongoing basis.”

The news may be welcome to property investors at a time when government crackdowns appear to be trying to make it more difficult for landlords to make a profit, combined with slightly stilted house price growth as the market is affected by higher taxes, stricter mortgage lending, the potential for rising interest rates and the political uncertainty surrounding Brexit.

An example cited by Newbery is of those investors who chose to leave the market during the difficult years following the recession in 2007, as property price growth has since recovered and exceeded pre-crisis levels.

He added: “The secret to successful property investing is ultimately the same now as it ever was. The market consistently rewards those who remain level-headed, diversify portfolios and do their research.”

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