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Is Property a Good Long-Term Investment?

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    Long-Term Investing: The Key to Financial Security?

    For many investors, long-term strategies are probably one of the best ways to secure a thriving financial future.

    While short-term investments can appear more ‘exciting’ and safer than long-term strategies, they often come with more substantial risks.

    Long-term investments, on the other hand, see a much lower level of risk comparatively.

    Property investment has long been revered as one of the top long-term investment strategies, boasting historic stability amidst economic turbulence and offering significant capital value appreciation over time.

    Typically, if a buy-to-let investor holds onto an investment for more than ten years, it doesn’t really matter if there are market fluctuations in the second year; so long as the economy doesn’t completely collapse, investors will usually see a substantial return on their investment.

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      What is Long-Term Investment?

      Long-term investments are assets that an investor plans to keep for a longer period of time.

      There is no firm definition as some believe anything longer than one year is classed as a long-term investment, while others put forward the three or five-year mark as the turning point into a long-term strategy. In terms of UK real estate investment, many investors will hold their assets for decades in order to get the best returns possible.

      Long-term investment strategies have many benefits over short-term investing, and they are usually viewed as a more stable and safer option.

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      Long-Term Investment vs Short-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.

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        Long-Term Property Investment Strategies

        When it comes to property investment, most strategies will do better under a long-term approach.

        A strategy that is better suited to short-term investing is buy-to-sell, also known as house flipping. However, this strategy relies very heavily on current market performance in order to make big enough returns to make it worth an investor’s time.

        Therefore, long-term property investment strategies have become more popular in recent years.

        In particular, buy-to-let is one of the most lucrative long-term investment strategies because the investor is able to earn returns in two distinct ways – monthly rental income and capital appreciation on the property.

        There are also many different types of buy-to-let property investment strategies, allowing an investor to diversify their portfolio.

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        Residential Buy-to-Let Property

        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!

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          Serviced Accommodation Investments

          Increasingly popular amongst tenants and landlords alike, serviced accommodation is another buy-to-let property investment strategy that many long-term investors are considering.

          Like residential buy-to-let, investing in serviced accommodation involves purchasing a property – whether a house or apartment – and then renting it out for income.

          The significant difference, however, is that these properties are rented out to those seeking somewhere to stay during short-term stays, offering services like a concierge and other hotel-like amenities.

          Also known as holiday lets, these properties will typically be listed on websites like Airbnb and are gaining significant popularity amongst travellers for several reasons:

          • More space than a hotel room – serviced apartments provide larger living spaces, offering guests greater comfort and convenience.
          • Better value for money – guests can enjoy more room at the same prices as in a hotel, with some residences offering even lower rates.
          • More privacy – serviced apartments can offer a more secluded and personalised experience than the traditional hotel experience.
          • Proximity to city centres – properties are also often located near city centres, providing easy access to amenities and transportation.

          Given these advantages, serviced accommodations have become an increasingly lucrative investment strategy, feeding the growing demand for short-term accommodations among tenants and landlords.

          Investing in serviced accommodation can earn a far higher rental income as a long-term strategy than regular residential properties. As long as the property is in a prime location, the risk of significant void periods is mitigated, and there should be a steady influx of tenants (and income) for the foreseeable future.

          Find Out More: Discover the best places to buy Airbnb Property in the UK and how to invest £500k!

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          Off-Plan Property Investment

          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!

          Off Plan Investment Guide

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            What is the Best Long-Term Property Investment?

            Broadly speaking, buy-to-let property investment is uniquely well-suited to investing for longer periods of time; therefore, it is considered one of the best long-term investments. This is due to the dual returns, meaning an investor will still enjoy income in the short term in the form of rental income. This will enable the investor to hold the property for as long as they want in order to maximise gains.

            But of course, the right property investment strategy will differ for each investor, contingent on their individual situation and financial goals.

            The good news is that diverse property investment strategies are available to investors who are thinking long-term, meaning it is just a matter of finding the perfect one for you. In order to work out the best long-term property investment, it’s important to evaluate your own short and long-term goals and match them to a strategy.

            As mentioned, there are various strategies within buy-to-let investment, allowing savvy investors to make intelligent choices about which type of investment is best for their long-term plans.

            If possible, another good long-term investment strategy is to diversify your investment portfolio, which can include several types of property investment.

            For example, an investor may invest in both serviced accommodation and student housing. This way, if one sector isn’t performing well at one time, it will still be covered by their other investment and vice versa.

            The Resilience and Rewards of Property as a Long-Term Investment

            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.

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            Off-Plan vs Completed Property

            The ultimate guide to help you choose whether to invest in off plan or completed property in 2024.

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            Why Now Might Be the Right Time for Long-Term Property Investment

            While the market is sometimes characterised as sluggish, UK property has experienced this temporary stalling before and remained resilient. According to most market forecasts, this is not predicted to continue for long. Savills’ Residential Market Forecast states that the UK property market is set to start recovering next year and return to healthy growth from 2026 onwards.

            This means that now might be a good time to consider buying an investment property while the prices are lower.

            Would you like to know more? Take a look at our  updated buy-to-let area guides for the latest insights:

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            Jessica Ferris

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            Jessica is a property content writer at RWinvest. Keeping a close eye on the UK property market, Jessica helps our readers stay informed and up to date on the latest market news and statistics.