The secret to successful investment

October 18, 2022

Investors who have been sitting on the sidelines for a couple of years to try and gauge the market might have lost out, but that doesn’t mean the ship has sailed.

Deciding whether to utilise savings accounts and other investment options, or to invest it into the UK property market has become a less clear-cut choice in recent weeks. Popular media cries of an upcoming dip in house prices, and while most experts expect a slowdown compared with what we have seen, there is more to the picture.

At the start of the Covid pandemic, most forecasts were revised to foretell a housing market crash, with prices expected to falter, or even fall off a cliff. This inevitably prompted many would-be investors to hold tight to their wallets, waiting for the dip. However, what actually happened was the opposite; after a brief pause while people grappled with lockdown rules and the logistics of viewings and marketing properties - as well as building them - a “new normal” emerged.

This saw the UK property market ramp up at a remarkable pace. As people reassessed their priorities, various trends took shape over the past two years, from a race for space to people eschewing city for country living. While some of these trends have certainly begun to reverse and remould themselves now (such as cities once again being top of the agenda for investors and young professional renters alike), the high level of demand in the market continues to outpace the number of available properties.

“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

For those who opted to hold onto their savings back at the start of the pandemic, and ‘wait and see’ what would happen with the property market, a huge opportunity was certainly missed for many. With the Bank of England base rate remaining at rock bottom for a number of years post-credit crunch, both borrowing and savings rates were also low, meaning not much profit was made by leaving money in the bank - if any.

As Warren Buffett, American business magnate, investor and philanthropist said: “Someone’s sitting in the shade today because someone planted a tree a long time ago.” Buffet is one of many successful investors who strongly believes that all asset placements should be viewed with an eye to the long-term future, and investors should look past short-term turbulence and uncertainty.

He also famously said: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” This is certainly apt when it comes to the UK housing market, which generally produces the best results for those who own property for a number of years. Thus, for those looking to invest for maximum gains in the long run, while timing can make a difference, the earlier you invest in property at any stage of the cycle, the better.

Over the past 10 years, house prices have increased by an average 4.3% each year. And over the past year alone, prices have soared by around 10%. If you’d invested £200,000 this time last year, you’d be looking at around a £20,000 profit, in raw numbers. If you’re in the buy-to-let space, depending on your level of borrowing, you are also likely to have reaped some healthy rental yields, as the private rented sector has also been booming with tenant demand.

From location to location, these price increases and rental yields also vary. Generally, areas in the north of England have been the top performing on both fronts, with the likes of Manchester, Birmingham, Liverpool, Leeds and Newcastle all leading the way ahead of London.

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When to invest

One of the lessons that Covid brought with it is that nothing can be certain, and while property market predictions and forecasts can paint a useful picture, they are always subject to change. While many markets, including property, are cyclical, things can come along that throw things off-course, which is why looking at the broader, long-term overview is important.

There are ways you can create more certainty in your property investment. Investing in an up-and-coming or thriving location, such as an area that is set to receive major regeneration investment, will ensure your property retains or improves its value, and appeals to both future buyers and prospective tenants.

Future-proofing is another aspect growing numbers of investors are factoring in at the moment. Rising energy bills mean most buyers and tenants are taking notice of energy performance certificates (EPCs), so investors should, too. One strategy is buying a run-down property with the intention of revamping it in the hope of upping its energy credentials and value; the other is to invest in a new-build, which comes with the assurance of limited future maintenance costs as well as better energy efficiency.

Buying off-plan can save investors money while also allowing them to benefit from a brand-new property. By investing before the property is built, there is the chance it will have increased in value by the time of completion - and if not, they are expected to hold their value better over the long-term.

The age-old quote - “The best time to invest was yesterday; the next best time to invest is today” - certainly continues to apply for those who make well-informed investment decisions in terms of property, location and who you work with.

If you want to know more about the opportunities we’ve got available at The Prestbury Advisory, get in touch with our team today on 01625 725 779, or email us at contact@theprestburyadvisory.com