Is property still profitable?
When making a big financial decision or taking a risk, I don’t think anyone ever feels comfortable or like it’s the right time. But now more than ever people are questioning whether property investing is still worthwhile. Let’s take a look at why that is…
What makes property investment attractive?
Have you ever heard of the saying “All good things come to those who wait”? Well, this couldn’t be more fitting than when it comes to property investing. You can’t purchase a property expecting to make a chunk of money straight away. But leave it a few years and you’ll build equity, as well as receive a monthly rental income.
You see, the property market has a cycle of downturns and booms and in the long-term, prices go up. As I’m sure you know, we had a boom over the past year, with property prices increasing by 12%.
And if we’re looking at the past 50 years, though we’ve had a few ups and downs in between, the average property price has increased from £4,057 to £278,000!
Why are people more hesitant about property investing?
Although the above stats make property investing highly appealing. It’s not as easy as it used to be. Major events have had a rippling effect on our economy, and we can’t be certain what the rest of 2022 has in store for us. But with higher property prices, increasing mortgage rates, and changing regulations, it’s no surprise people are reluctant about delving into property investing or continuing to be a landlord.
Legislation
Where landlords in the past may have self-managed properties to reduce expenses, now it seems sensible to hire a letting agent. With new rules and regulations being introduced, it can be difficult to keep up. A letting agent can make sure you’re fulfilling your legal responsibilities by taking care of the following:
Registering tenant deposits
Obtaining the necessary certifications to demonstrate the property is fit-for-purpose
Right to rent checks
Tenant contracts – knowledge of notice periods
Energy efficiency standards
And much much more!
Costs
The cost of living has increased drastically this year, rent included. But landlords didn’t see any extra profits in their pocket with higher costs themselves. With higher property prices comes bigger deposits and taxes, and with new legislation, landlords also face pressure to make property improvements.
Those considering property investing need to account for higher start-up costs and a bigger contingency fund, and current landlords need to accept that investing may not be as profitable as it used to be.
Landlords have been on a bit of a roller coaster ride over the past few years. Many had to absorb losses from their savings during the pandemic due to tenant arrears, and then when house prices boomed most would have benefitted from their properties increasing in value.
Because of all the ups and downs, property investment is deemed a little riskier than it used to be and not as profitable. Yet still, if the figures work and if your ‘why’ is strong enough to keep you motivated, property investing can be worthwhile in the long run.
History speaks for itself.
