Is Property a Good Long-Term Investment?

So why are long-term investments typically considered the safer option?

Firstly, investing long-term means the investment is not as susceptible to market fluctuations. Keeping hold of the asset throughout allows an investor to ride out any bumps in the market until it bounces back, allowing the investment to recover from any dips.

Market volatility is a common phenomenon, and short-term investors can easily get caught out. This is why long-term investments are usually viewed as the safer option.

Investing long-term can also give the asset more time to grow in value. This is a simple concept – with more time, there’s more chance for the investment to reach its potential.

Apart from financial benefits, there is also a psychological advantage to investing long-term. Short-term investments can be stressful, and quick decisions have to be made that may lead to regret.

Investors who are in it for the long haul can take their time to properly assess situations and focus on long-term goals, regardless of how the market is performing at that time.

Buy-to-let property investment is one of the most well-known and proven methods of generating regular passive income, with investors earning regular monthly sums from tenants living in a property that they have purchased.

Due to its ability to grow in value over time, this is also one of the best assets for those looking to invest for an extended period.

Because of capital appreciation, the longer you invest in buy-to-let property, the more you can earn in the long run.

Typically, past performance shows that property prices tend to increase in the long term, but in the short to mid-term, they can also fall. Investment properties in London have been popular for many over the past decade, but rapidly fluctuating prices and uncertain markets have created uncertainty for some investors.

Factors such as these mean it can be difficult to precisely determine what a property’s value will be worth in the future. However, you can mitigate significant risk by thoroughly looking into all areas of your investment (including the latest projections and analysis).

As of March 2024, the latest Savills projections suggest that property prices in the UK will rise by an average of 17.9% in the next five years. This growth is expected to be as high as 20.2% in certain regions, like the North West and Yorkshire.

For example, suppose you were to purchase a property in a UK investment hotspot (such as Liverpool or Manchester). Over the next couple of years, the property’s value will hopefully increase. You could choose to retain your property and continue to see a steady stream of regular rental yield, or (if the price has risen considerably over time) you could sell and put the money towards your retirement.

Due to the ongoing cost of living crisis and other economic factors, various experts also predict that prices will fall by an average of 5-6% by mid-2024. For those looking to invest for long-term gains, this will not matter as much and, contrary to initial appearances, could benefit investors. In fact, a short-term drop in house prices could make properties cheaper, with overall value likely to grow over time.

Learn More: Delve deeper into long-term lets with our free investment insights, covering everything from what to invest in right now in the UK to the best way to invest £100k!

Off-plan property is an investment strategy particularly suited to those looking to invest in the long term.

‘Off-plan’ refers to investing in a property while it is still in the planning or construction stage. Through this strategy, investors can take advantage of discounts or payment plans developers offer for those who invest earlier in the project. Usually, an off-plan property will be listed below market prices, making it an excellent way to acquire a newly-built property, typically more expensive than older properties, at a cheaper price point.

This is definitely a long-term rather than a short-term investment strategy, as the investor will have to wait until the property is completed before they can start collecting monthly rental income. Off-plan developers will usually target in-demand cities forecast to benefit from significant capital appreciation, such as areas undergoing regeneration efforts. Often, the property will have grown in value by the time it is completed.

Therefore, over the long term, investors stand to make sizable gains from both rental income and the property’s capital growth.

Further Reading: Learn more about investing in off-plan properties with our updated 2024 guide!

2023 was called a challenging year for the UK property market, leading many to wonder if property is no longer a lucrative investment strategy.

While the market was subdued, it still showed resilience with modest price growth in many areas and small dips in price in others.

The property market will always be susceptible to the ebbs and flows of economic forces, which is why it works best as a long-term investment strategy.

This is clearly demonstrated when we look at property price growth over an extended period. When looking at month-to-month or year-on-year changes, the property market has been subdued in the past year, but the average UK house price has risen steadily over the course of twenty, ten, or even just five years.

For example, if you look at the latest UK House Price Index data, you can see that the average price of a property in December 2019 was £231,792, and the figure for December 2023, just four years later, is £284,691 – a difference of over £50,000.