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Long-term property investment should see BTL landlords ‘come out on top’

Higher taxes, tougher mortgage lending conditions, along with political and economic uncertainty are making investment in buy-to-let less attractive to many existing and potential landlords, but the reality is that property remains a solid long-term investment.

With savers continuing to receive appalling returns from banks and building societies, a number of people continue to turn to residential property as a means of supplementing their income, supported by historically low mortgage borrowing rates, high demand from tenants and increasing rents. 

Those who have invested in residential property were in profit 83% of the time, on average, over the past 50 years, fresh research shows.

Property investment platform British Pearl analysed typical five-year investments made over the past half-century and found investors would have made money during the vast majority of investment periods.

The study found that average house price appreciation was 58.6% between April 1968 and April 2018 on properties held for five years.

Property prices only fell in five periods, representing an 89.1% success rate.

British Pearl then factored in stamp duty and conservative estimates for mortgage payments, legal fees and interest. This then identified a further three years in which investors who bought properties would have lost money over the following five - a success rate of 82.6%.

The best profit would have been enjoyed by the average landlord buying in 1969, resulting in a gain of £4,589 - a return of 148.6%.

The sharpest decline in residential property prices occurred between 2007 and 2012 when average UK values slumped by 7.9% on average.

James Newbery, investment manager at British Pearl, commented: “This research shows investors who play their cards right and hold their nerve in the midst of economic or political upheaval are still likely to come out on top.

“History shows us that investors who are prepared to weather storms rather than run for cover are still able to make strong returns at times from investments that present a very limited risk of loss.

“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.

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

“Those investors who ran for the hills after the dip between April 2007 and April 2013, only for growth to recover in the years that followed, will be kicking themselves for acting on impulse and abandoning property altogether.

“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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