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Property Investing: The Next Five Years

Adam Lawrence, Property entrepreneur and co-founder of Partners in Property, comments

You might well be sick, by now, of hearing about doom and gloom. Recessions. Rates racing upwards. Legislation, white papers, selective licensing - a tightening noose of sorts. If you feel like I do then you might also be concerned that this government is not a long-term, fiscally sensible, strategic partner. This despite some recent, more positive signs from Government for the first time in the past seven years, with Liz Truss apparently saying that landlords, property investors and developers had been treated badly.

Some of this doom and gloom is already playing out. Some is nearly guaranteed to play out. Some of it won’t work out as there are no guarantees. That’s the nature of forecasting the future, and I wanted to start by being clear - we are ALL forecasting the future. “I don’t have a crystal ball” I hear you say - OK, fine. Neither do I. But we might both agree that property will rise in value, nominally, by a decent amount over the next 30 years. In fact, I would guess that 95%+ of readers would probably agree that the nominal prices will at least double, from here, in the next 30 years.

Next 20? Bullish. Next 10? Bullish (not the doubling “every 10 years” often peddled by the gurus - but nonetheless, bullish). The next five years - I’d estimate a 15% rise in the market, plus or minus 10% either way. I feel more comfortable making a direct forecast, at that point. The next two years? Not easy - but more like a 5% rise, plus or minus 5% either way. A tighter spread.

The difficulty is the interest rate, which I believe will hit higher highs than the market currently expects. Inflation is stronger, for longer, than the markets are currently admitting. At some point - and we might be quite close - the market will instead overshoot and get too bearish; that’s when it will pay to buy bonds, or similar. The interest rate, as soon as the pay rate hits >5.5%, has the potential to make a major impact on the housing market. We might well be ‘OK’ (comparatively) by the time the base rate gets towards 5% or so - and lending margins may well squeeze by hook or by crook to control the housing market  - particularly because it has so much political importance for the incumbent party.

Anyway - if we feel comfortable over five years, but there’s a whole number of variables of concern over the next two years, then a 5-year plan looks sensible. We can (I certainly can!) pontificate all day, but we are only moving forwards when we are taking action, rather than navel-gazing.

Let’s consider the key metrics to make this relevant to as many readers as possible. Here’s some suggestions:

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