Have You Left It Too Late To Invest In Property?

New figures showing that house prices are finally cooling are bad news for would-be property investors, says Harvey Jones

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A string of new figures suggest the UK house price surge is finally running out of steam.

Property prices fell 0.2% in England and Wales in September, according to the Land Registry. Mortgage approvals are down 20% since their January peak, Bank of England figures show.

Once-booming London is leading the slowdown. Luxury home prices in prime central London have fallen by 20% or more in the past six months, estate agency Strutt & Parker says.

Nationwide predicts prices will continue to “soften” across the country, as new buyer enquiries fall.

The boom is over, for now.

 

Your Rental Property Is My Pension

That’s good news for first-time buyers, who have watched prices soar further out of reach. But it’s a blow to the growing number of Britons who reckon investing in property is the best way to secure their financial future.

The buy-to-let scheme has turned hundreds of thousands of ordinary people into amateur landlords, and most have done well out of it.

The average landlord enjoyed an enviable total gross return of 13.4% in the past year, equivalent to £22,706, according to estate agencies Reeds Rains and Your Move.

They earned £8,379 in rental income on average, plus a capital gain of £14,327.

But these kind of returns will now be harder to sustain in future. 

 

No More Easy Money

With buyers reluctant to pay today’s inflated prices, and base rates likely to rise next year, you can’t bank on making a quick capital gain from rising house prices. You could even make a loss, if prices continue their recent decline.

Rental income growth is also slowing, up just 1% over the past year, according to the Office for National Statistics. As wages stagnate, tenants simply can’t afford to pay more.

 

Goodbye To Buy-To-Let?

I’m not predicting a dramatic house price crash or a buy-to-let collapse: given the UK housing shortage, tenant demand won’t suddenly disappear. 

Just don’t expect to make a quick buck from soaring rents and property values. This is now a steady long-term investment, rather than a fast route to riches.

And make sure you’re prepared for the effort of choosing the right property, doing it up, selecting a mortgage, finding honest tenants, and carrying out maintenance and repairs.

Investing in property may be less rewarding than before, but it will be just as much effort.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »