The ‘right time’ to invest will depend on many factors, not least what you are hoping to achieve. If you’re looking to make a quick profit from short term investments in property, the UK residential market can be risky: many opportunities are over-reliant on the market, which is beyond your control. If, however you’re looking for wealth preservation and capital growth in the medium to long term, then the UK residential market, and specifically the Private Rental Sector (PRS), is worth focusing on.
The long term investors we work with typically want to invest in property to achieve:
- Diversity,
- Stability,
- Cash flow,
- Growth potential,
- Tangibility, and
- Wealth preservation.
Sometimes, they worry about whether now is the right time to invest in property, due to media messaging or other people’s opinions. Other people might be forecasting that house prices will:
- Grow,
- Remain stable, or
- Fall.
Industry “experts’” opinions can often be conflicting or biased. They are also not universally applicable. The housing market is not one market and different trends apply in different geographies.
So, should you invest in UK residential property – if the market is rising, stable or falling? Let’s take each in turn.
The case for investing in a rising market
- If house price forecasts are right, you should be able to access capital growth
- If the housing market is buoyant, it is generally easier to get valuations, and finance is easier to qualify for and access
- In a rising market, developers are generally more active, resulting in more stock being built and sold. You might not want to invest in new build properties, but if other investors are putting money into this stock due to forecast property market growth, then there may well be less competition for existing built assets.
- If you’re investing when everyone else is doing so, there is a sense of comfort – it feels less risky.
The case for investing in a stable market
- If house prices are forecast to remain stable, it’s easier to identify assets offering value
- If the housing market is stable, it’s relatively easy to get accurate and predictable valuations, and to qualify for finance
- You can still make cash flow and profit, without relying on capital growth for your investment returns
- When pricing is stable, there is less of a rush to invest or need to overpay for assets due to high competition.
The case for investing in a falling market
- If house prices are forecast to fall, there can be great deals to be had
- The prediction of house price falls can be premature, over-stated, or completely wrong
- The fear of a market crash can make it easier to negotiate a good deal as there is typically less competition from other buyers
- You can still make cash flow and profit (the main objective for many long term investors), without relying on capital growth for your investment returns.
- As it may be harder to access finance, many potential buyers will withdraw from the market, meaning you have less competition.
The bottom line is, no-one is able to predict where house prices will go and all markets can create “opportunity”. There are strong arguments in favour of investing in any of the possible scenarios.
The biggest regret of many of the investors we’ve worked with is not getting started sooner. For example, had you invested in the right assets in 2008 just before the housing market crash, you could have benefitted from substantial growth and rental income in the decades since.
In the wise words of Warren Buffet, if you’re focused on investing to preserve and grow wealth it’s about ‘time in the market, not timing the market’. It’s always a good time to invest, if you get the strategy, deals and management right.
If you would like to discuss building your portfolio with SPI Capital, get in touch via info@spi.capital to arrange a confidential, no obligation conversation.