Should I hold, should I buy, or sell my property investments?
Which stance are you taking
You would usually choose to hold property because history has proven consistently that the recorded value of UK property has outpaced inflation significantly for around 1000 years.
Indeed, long-term capital growth since the Doomsday book was written nearly 1000 years ago puts growth at over 11%.
The problem, however, is that you don’t know how much capital growth you are likely to get each year or the precise timing of it. Therefore, if you can’t time the returns from it (like most investments) you are more likely to get the benefit from the big jumps in value by staying invested over the long term. I realise this can be difficult when commentators are telling you to do otherwise with stories suggesting that UK property will fall imminently, but the vast majority are usually wrong with their predictions about how much property will rise, fall or the timing of such price changes.
These commentators also frequently get confused over affordability. Many have said that affordability is too stretched for any future capital growth to materialise for every one of the 15 years which I have been conscious in this space. But despite their often flawed hypothesis, prices continue to rise. Some of this can be explained by the fact that we build smaller properties these days to compensate meaning that houses aren’t as expensive as they first seem as people just live in less space.
With the average
The reality is that the supply of UK residential property is constrained by tough planning policies, despite what the government says it still isn’t getting anywhere near reaching its targets for new homes and doesn’t look like it will anytime soon.
Economics dictates that the relationship between supply and demand equals price – if you can’t supply properties in enough quantity
In relation to investment purchases, you can usually apply debt to UK residential property and get around 70% of your capital back anyway for further investment into other assets meaning the opportunity cost of the money held in the investment is limited in any event.
This also knocks into touch the argument that many commentators make about returns in property being very low once inflation is taken into account. If you have borrowed 2/3 of the money for the investment, it is someone else’s money which has depreciated due to inflation effectively meaning that inflation has eroded the money you owe the bank in addition to any capital repayments which you have made.
In addition to these
A key question I ask myself when deciding whether to hold or sell property is what I plan to do with the money afterwards. If the money is being released because I have a great investment opportunity for which the profits are likely to exceed that of my property investments over the long term I may consider it. Yield is usually the biggest driver however if I plan to sell and
NB These views are only my personal thoughts and should not be read or taken as formal advice. Always speak to an Accountant or a Financial Planner for investment purposes.