Is now a good time to invest in property, or are we in a property bubble that’s ready to pop? And are there better ways to invest anyway, with fewer headaches? 

We all know house prices are an obsession with us Brits, and with the media reports of house-price bubbles and buy-to-let millionaires you’d think buying houses and letting them out is a foolproof way to make money. And property investments are, well, as safe as houses, aren’t they?

One look at the house price chart for the last 30 years shows they very much aren’t:

In fact there are a great many investments with much better-looking performance charts than that!

If you bought a house at the peak in 1989 it would be 12 years before your house was worth what you paid for it, and if you bought in late 2007 you may still be waiting for values to recover.

However of course property has a huge advantage that other forms of investment don’t: You can borrow potentially hundreds of thousands of pounds to buy a house using the property itself as security. In contrast, no bank will lend you significant sums to buy shares, gold, diamonds or fine wines, no matter what the investment performance charts say.

Also property letting produces a regular monthly income (barring void periods) regardless of the value of the property itself, so as long as this covers your outgoings (the mortgage plus costs and fees) then any increase in property value is icing on the cake. The national average rental yield is about 5%, according to the Association of Residential Letting Agents.

Realistically in the long term property should always increase in value since the UK population is growing, which means an ever-higher demand for homes.

Becoming a landlord is a daunting prospect, but once organised you should find that property management is quite straightforward. Many start whilst holding down their day jobs, with some going on to make it a full-time, and lucrative, occupation.

Alternatives To Buy-to-Let

It is possible to invest in property without actually buying a single house or having a single tenant.

• A number of unit trusts invest solely in property, either across all types or in specific sectors such as retail parks. Fund managers Aberdeen Asset Management are specialists in this sector, with many of their funds performing well over the past 5 years, although [disclaimer alert] past performance is not a guide to the future.
• A couple of newer schemes such as Property Moose allow investors to club together to buy a cheap house, do it up, then rent it out, taking a proportional share of the rent and any increase in value. Investments are available from £500.
• One hot property right now is investment in luxury student flats – firms are offering 7% yield ‘guaranteed’ (by the firms themselves only) for 5 years, plus all management taken care of. Sounds like a great deal but approach with caution, these investments aren’t covered by any financial services regulations so if the company goes bust you’re left owning a student flat which may have a reduced value and no tenant.

In the end there’s nothing like owning your own portfolio of property which you can manage as you see fit, possibly with the help of a reputable letting agent like Newlife Lettings.

Past performance is not a guide to the future. Market and exchange rate movements may cause the capital value of investments and the income from them to go down as well as up and the investor may not get back the amount originally invested. The information contained in this website does not constitute an offer of, or an invitation to apply for securities in any jurisdiction where such an offer or invitation is unlawful, or in which the person making such an offer is not qualified to do so.