Houses remain a stable investment

With the introduction of the Affordable Rent Act, we often get asked whether it is wise to sell the property or keep it for rental, and if a house is still a stable investment for the future. Houses remain a reliable and valuable long-term investment. In this article, we will discuss why houses are a stable investment and the expected price increases in the housing market. We will also cover the risks and benefits of investing in houses, as well as tips to optimize your investment.

What makes houses a stable investment?

To understand why houses are a stable investment, we need to look at the role of supply and demand in the housing market. People always need a roof over their heads, resulting in a constant demand for houses. This demand is often driven by factors such as population growth and changing living conditions. On the supply side, we see that the construction of new houses does not keep pace with demand, creating scarcity. This causes house prices to rise in the short and long term.

Another factor contributing to the stability of houses as an investment is the influence of economic factors. Despite economic fluctuations, the demand for houses remains generally stable. Even during economic recessions, people will always need a place to live, making houses a reliable investment.

An interesting aspect of the housing market is the role of location in determining the value of a home. The location of a house in relation to amenities such as schools, shops, and public transport can significantly influence its value. Houses in well-accessible and popular neighborhoods often have a higher value than comparable homes in less favorable areas. This phenomenon is known as the location paradox, where the value of a house is primarily determined by its surroundings.

Expected price increases in the housing market

Regarding the expected price increases in the housing market, various forecasts are available. While no one can predict the future with absolute certainty, there are certain trends indicating that house prices will continue to rise.

One of the main factors contributing to price increases is the growing population. As the population grows, the demand for houses increases. This can result in higher house prices, especially in areas where supply falls short. Therefore, it is important to consider demographic trends when investing in houses.

Another factor that can influence price increases in the housing market is the interest rate. Low interest rates can stimulate the demand for houses, as it becomes more affordable for more people to take out a mortgage. This can lead to increased competition among buyers and ultimately higher selling prices. On the other hand, rising interest rates can reduce the affordability of houses, decreasing demand and possibly stabilizing or even lowering prices. Given that the interest rate has been reasonably stable for some time now, it is expected that house prices will continue to rise. This year, the expectation is around 7%, and next year 5%.

Risks and benefits of investing in houses

While houses can be a stable investment, there are also risks involved. It is important to be aware of these risks before deciding to invest in real estate.

One of the potential risks is that house prices can fall. Although this generally occurs less frequently, it can happen during economic recessions or in areas with an oversupply of houses. Therefore, it is important to thoroughly research market conditions before investing.

On the other hand, there are also many benefits to investing in houses. Houses can be a stable source of passive income, with the possibility of receiving monthly rent. Additionally, you can benefit from long-term property appreciation, growing your investment.

Besides the financial aspects, there are other considerations when investing in houses. A crucial point to consider is the location of the property. The location of a house can significantly impact both the rental price and the value development. A house in a popular neighborhood with good amenities and proximity to schools and shops can be more attractive to potential tenants and buyers.

Furthermore, it is essential to consider maintenance costs. As a landlord, you are responsible for the maintenance of the property, such as repairs and renovations. It is wise to build a buffer for unexpected costs to avoid financial surprises.

How to optimize your investment in houses

If you have decided to invest in houses, there are several ways to optimize your investment.

One of the most important tips is to choose the right property. This means thoroughly researching the location, neighborhood, and potential appreciation of the property. It is also wise to have a professional appraisal done to ensure you pay a fair price for the property.

The importance of location cannot be underestimated when investing in houses. Homes located in popular neighborhoods or areas with good amenities usually have higher value and are easier to rent out.

Renting property with the affordable rent act

With the introduction of the Affordable Rent Act, there are many questions about renting out real estate. The main question is whether it is still profitable to rent out. We don't have a simple answer for this; it greatly depends on the situation and the type of property you are renting out. If there is a mortgage on the property and the rent is adjusted to middle rent, it can be challenging to keep renting out as you lose monthly returns. But if you have a property in the private sector, it is certainly still profitable to keep renting it out, also considering the appreciation of the house and private sector rents, which are likely to continue rising in the coming years. In our blog 'sharp decline in available private sector rental homes; what opportunities does this offer?' we explain more about this.

Buying property for rental

Buying a property to rent out can still be an interesting long-term investment. Every investment is for the long term; a house is no different. An investment in stocks is also not stable every year and does not yield immediate returns. If you have this long-term vision and sufficient financial space to buy a property that you can rent out in the private sector, this is still a good investment, even in the current market. In the blog mentioned above, we discuss the opportunities currently in the market and how you can take advantage of them as an investor.

Conclusion

In summary, houses remain a stable investment with expected price increases. With the right knowledge and strategy, you can benefit from the advantages of investing in houses and optimize your investment. Always remember to do thorough research and consider market conditions before investing in real estate. With patience and careful planning, you can build a valuable and stable investment in the housing market.

Would you like advice on purchasing an investment in the current market or renting out your current property(ies)? Our experienced realtors can tell you all about it. Feel free to contact us to schedule an appointment.