Property: is it the right investment for you?

Property – is it the right investment for you?

We’re obsessed with property values in this country and the fluctuating fortunes of the market has a major bearing on people’s general financial confidence and sense of security.

A recent report by the Nationwide Building Society estimated that UK house prices rose by just 0.2 per cent in the 12 months to September 2019 – and with the spectre of Brexit and election uncertainty, it’s difficult to predict which way it’ll go next.

At Arkenstone, we’re seeing an increasing number of clients questioning whether residential property (as an investment) is right for them and perhaps more importantly, whether it’s an essential part of a sound, long-term financial plan.

One of the main attractions is that property generally offers decent income and growth potential over the long-term (actual returns are dependent on various factors). It requires little by way of expert knowledge and for some owning a real physical asset can also feel very reassuring – ‘safe as houses’ and all that.

But the list of downsides is growing – a large capital outlay is required even before stamp duty, legal fees and perhaps letting agent bills. Your full rate of income tax gets applied to the rental return (mortgage interest relief is now limited) – and don’t forget the eye-watering 28 per cent capital gains tax if you chose to sell, which is the only way to liquidate your asset (other than taking out a mortgage). All of these factors take a huge bite out of your headline returns.

And while we’re told ‘everyone needs a roof over their head’, you’ll have heard the stories of nightmare tenants and empty properties too. If there’s a problem, you’ll have to sort it out, or pay someone else to. In short, if you want an easy life, property might not be the investment for you.

There are alternatives of course – over the long-term a balanced portfolio of investment funds containing assets like shares, bonds and even commercial property offers plenty of potential for similar and, in some cases, better returns than residential property. What’s more, it’s possible to protect those returns from taxes using relatively low-cost vehicles like ISAs and pensions. These types of assets are also a lot less rigid than direct property and can be very useful when considering lifetime gifts and estate planning. Of course, a lot of this can be unknown territory so professional advice may be needed to help you make the right decisions.

In the end, your choice of investment isn’t necessarily a binary decision, but if the property story is starting to feel less and less compelling for you, get in touch and we’ll show you how you can plan for long-term financial security and independence – with or without property.



Your home maybe repossessed if you do not keep up repayment on your mortgage.

The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate buy to let mortgages.

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