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How Much Will Your Investment Property Be Worth in Five Years?

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Nine times out of 10, money is at the root of all investments. Property is becoming an increasingly popular investment vehicle, with the potential for both short- and long-term returns.

From capital growth to rental income, there’s plenty of opportunities for an investment property to provide value. In this article, we discuss how much your buy-to-let property could appreciate in just five short years. 

How Much Is Property Worth Currently?

According to the House Price Index, the average UK property price currently stands at £274,700. With these competitive entry prices, property usually requires more upfront capital to get the ball rolling, especially in comparison to other assets.

While REITs provide the opportunity to get involved at a much lower initial cost, the higher entry prices that come with a traditional buy-to-let typically allow for higher property growth in both the short- and the long-term. 

Aside from the potential for high returns, there are many advantages that come with investing directly in a property. Its resilience is just one of these. Over the past 18 months, the UK property market has gone from strength to strength – despite the global pandemic. 

While the UK entered yet another recession and many industries struggled to survive, property prices made history and average rents reached all-time highs. The value of the average UK property increased by 5% in 2021, making it one of the most competitive markets on record. 

The momentum from the past two years has seen the average UK property experience its biggest annual cash gains in more than 40 years. In February alone, the average property price increased at a rate of £370 per week. As a result, properties across the country are now worth £27,000 more than they were in March 2021, on average. 

Related: How to Invest in Real Estate Rentals

How Much Has Property Grown in the Last 10 Years?

We all know that property is usually most lucrative on a long-term basis. The last two years were unexpected to say the least, but property prices have been on an upward trajectory for many years. 

Since 2016, the average UK property price has increased by almost 30%, equating to a rise of £59,000. This consistent growth throughout the market can be attributed to a combination of things, from continued demand to expanding regeneration schemes and the UK’s chronic undersupply of property. 

With these opportunities for property investment growth, it’s no surprise this asset is most successful on a long-term basis. While holding periods will usually differ depending on an investor’s financial plan, the general consensus is that you should try and hold your property/portfolio for as long as possible. 

Although five years is usually enough time to allow a property to significantly appreciate in value, if you were to hold for another five years, it would equate to even bigger returns. More specifically, the average UK property price has increased by more than 64% since 2011 – a rise of around £107,000. 

You might think that other investments have the potential to offer a tangible return worth more than £10,000 profit each year, but it’s crucial to remember that during this period, you’ll also be receiving rental income. Currently, the average UK rent is hovering around £1,000, meaning you could receive an annual gross yield of £12,000 on top of this. 

Related: What is a Good Rental Yield?

Which Cities Have Experienced the Biggest Increases?

The majority of UK towns, cities and regions have undergone some sort of price growth in recent years, but understandably, some areas have increased more than others. Generally speaking, more affordable spots across the Midlands have seen the biggest increases, especially in prime cities such as Birmingham and Derby.

City                          Average Property Price         10-Year Growth           Average Rental Yield    
Birmingham £206,500 £83,419 (64%) 5.30%
Derby £180,966 £63,351 (52%) 6.07%
Leeds £172,000 £83,462 (60%) 5.27%
Manchester £232,500 £96,408 (84%)  5.17%
Sheffield £192,362 £72,776 (59%) 4.45%
Liverpool £164,550 £55,005 (50%) 5.23%
Newcastle £177,877 £48,518 (36%) 5.10%
Leicester £206,498 £94,779 (79%) 5.31%
Nottingham £171,762 £75,882 (78%) 4.92%
Glasgow £162,081 £58,627 (55%) 5.31%

Money is at the root of all investments. Whether it’s short-term returns or long-term capital growth you’re looking for, making money is usually the most important part. In comparison to alternative assets, there are a wealth of opportunities for property investment growth. 

Not only did we see property prices reach an all-time high during a global pandemic, but prices have been consistently growing for the past 10 years. With the average UK property accumulating profits worth £107,000 in the last decade, it’s no surprise this investment vehicle is becoming increasingly popular. 
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