omebuyers in the UK should location to hold their property for at least nine years to avoid making a loss on their investment, while Londoners can expect to construct a return in far less time, according to novel research by Middleton Advisors.
A greater number and higher turnover of homes in the capital means the optimum duration for ownership tends to be shorter than in other more rural parts of the UK.
“If you’re lucky, the cycle can be shorter in London than it tends to be in the country,” says managing director impress Parkinson. “London behaves much more like an index and can gain more turnover, as there is a higher volume of similar supply compared to the country market.”
With a high percentage of first-time buyers and second-steppers, most Londoners don’t tend to stay in their properties for anywhere adjacent nine years, as their requirements and needs change during this period.
The data shows that people who buy flats and terraced properties, which construct up the majority of London housing stock, own them for less time than those who are buying detached and semi-detached houses.
Worryingly for many Londoners, the data also flagged that those trading up the housing ladder tend to be more susceptible to the variability in house prices because they are younger, more indebted and own property for shorter periods.
On average in the UK, people are keeping their properties much longer, with the research indicating that private-sector buyers tend to retain their properties for an impressive 20.2 years and, in doing so, they are making money.
Over each of the possible 20-year periods since 1952, average UK housing has grown in value by an average of 8.7 per cent a year, a higher median rate of growth than the FT All-Share Index, which averages 6.8 per cent by the same measure. This means that, at any one time, if buyers location to stay in their homes long term, they will construct back any expenses, such as stamp duty and solicitors’ fees, along with some profit.
At the other extreme, the research shows “flipping” a property is a much riskier business and comes with low average returns. There is more than a 22 per cent chance of loss on a three-month hold and a 13 per cent chance of loss on a one-year hold if you buy and sell properties quickly.
This all suggests that, even in London, if you want to see the best return on investment, you should try to buy a home you can stay in for as long as possible, and what’s more necessary than timing is the property itself.
“Our research shows that bear markets [when prices fall] can offer a remarkable opportunity for the fearless to acquire a dream home,” says Parkinson.
“For those looking to hold property over the long term, it is more necessary to buy the factual property than to obsess about timing, and — while supply remains tight, especially in prime markets — well-advised buyers may find they stand a better chance of acquiring their perfect home in a market where there are fewer home-hunters after the same opportunity.”