16 May Taking the long view: why the right property is more important than the right timing.
Middleton Advisors commissions ongoing research to investigate key trends and structural changes in UK housing markets. The latest research considers the dilemma facing current buyers: Is now a good time to buy? Should I wait for prices to fall more? How much might prices fall? In depth analysis of 70 years of UK housing market behaviour suggests that, for most people, such agony is unnecessary.
– Homeowners are keeping hold of their properties for longer and transacting less frequently. Private-sector buyers of UK housing are currently expected to own their property for an average of 20.2 years before selling.
– Taking a long-term view has a number of financial benefits to the homeowner. Unlike equities and other markets, average annual housing returns increase with the length of holding period, while volatility reduces:
o Over all the possible 20-year periods since 1952, average UK housing has grown in value by an average of 8.7% per year. This is a higher median rate of growth than the FT All-share index which averages 6.8% by the same measure.
o Over that same 20-year time span, property owners faced less financial risk. Perhaps surprisingly, the average annual standard deviation (a measure of volatility) for UK housing was 2.7% compared to 3.8% for the FT All-share index.
– Conversely, low average returns and greater volatility means ‘flipping’ properties in the UK on the basis of market movements only is a bad idea. There is more than a 22% chance of loss on a 3-month hold and a 13% chance of loss on a 1-year hold.
– The optimum holding period for private housing is a minimum of 9 years. Based on historical data the homeowner can be virtually certain that losses will be avoided: there have been no falls recorded in all of the 246 quarters since December 1952 following a 9-year hold.
Managing Director Mark Parkinson commented: “Our research shows that bear markets can offer a great opportunity for the brave to acquire a dream home. For those looking to hold property over the long term it is more important to buy the right property than to obsess about timing, and – whilst 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.”
