What Is Capital Appreciation? – RWinvest

What Is Capital Appreciation? 

So what does capital appreciation mean? Capital appreciation, also known as capital growth, refers to a rise in the value of an investment. If the value of an asset has increased over time, this would mean that capital appreciation has occurred.

How Do You Calculate Capital Appreciation? 

Capital appreciation is calculated by taking the original purchase price of the asset away from its current market price. For instance, if you bought a property for £120,000 and it was now worth £160,000, the amount of capital appreciation would be £40,000.

What Is the Difference Between Capital Growth and Capital Appreciation?

Capital growth and capital appreciation share the same meaning. Both terms represent growth in the value of assets over time, whether this is a savings account, a stock market investment, or a property.

So now that you know why capital appreciation for property in the UK is so important, let’s look at how you can boost your investment income with capital growth.

Here are some of the things you should do to ensure you’re getting the best possible level of capital appreciation from your buy to let venture.

Research High Growth Areas

One of the best ways to improve your chances of capital growth with a property investment venture is by researching the best places to invest in property.

While UK capital growth rates are predicted to be high over the coming years, with an average house price increase of 13.1% by 2026, certain cities and regions are outperforming others.

Out of all the regions in the UK, the North West region is experiencing the highest rate of property price growth. In the Savills house price predictions, the North West is expected to see house prices grow by 18.8% by 2026.

Recent data has found that the average rate of property price growth in Liverpool is outpacing growth in London by almost five times. Zoopla data shows that in the last 10 years, Liverpool properties have experienced market value growth of £65,937 on average, with a current value of around £197,091 as of January 2022.

Those who invest in Manchester and Liverpool are more likely to see significant North West capital appreciation returns from their investment property purchases. These cities also boast high rental yields, which is an added benefit if you want to maximise rental income.

Look For Ways to Add Value

Another option when it comes to increasing capital growth potential within your investment portfolio is to add value to the property directly. This means refurbishing the property, adding loft or basement conversions to increase space, or simply redecorating.

This strategy is most commonly used by those who purchase a property through an auction for a below market value price, with the aim of adding value through renovation work.

Due to the nature of this strategy, it’s often easier to add value to properties such as terraced houses or detached and semi-detached homes rather than apartments. That’s not to say, however, that there aren’t still ways you can boost the value of an apartment.

If you’re thinking of investing in a new build investment property, the property will likely already be very modern and decorated to a high standard.

While you may not need to do any major renovation work like updating the kitchen and bathroom, knocking down walls, or installing new flooring, there are some simple things you could do to improve long term capital appreciation.

This may mean repainting the property, adding stylish furniture to make it look high quality and modern, or giving the balcony or yard a makeover to make it look more appealing.