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Blog Post - Weathering High Interest Rates: The Long-term Perspective for UK Residential Property Investors

Updated: May 28


Dear Friends, New Landlords and Investors


The recent surge in UK interest rates has left many residential property investors feeling uneasy about the future of their investments. While these fluctuations may appear challenging, adopting a long-term perspective on property investment can provide valuable insights and opportunities. In this blog, we will discuss why staying fully invested in your property portfolio and considering selling only as a last resort is a wise strategy during periods of high interest rates.

This doesn’t service as financial advice but the aim is to broaden your perspective on the benefits and beauty of holding a long term perspective when it comes to property.


The Power of a Long-term View:


Capital appreciation potential: Property investments have historically demonstrated the ability to deliver significant capital appreciation over the long term. Despite temporary market fluctuations, such as increased interest rates, property values tend to rise over time, providing investors with a potential return on their investments. By maintaining a long-term perspective, investors can capitalize on this growth and build wealth for the future. Often we here the phrase property doubles every 7-10 years on average and I have always held that as a truism.


Steady rental income: While interest rates may affect property values, the demand for rental properties often remains strong. Higher interest rates can make purchasing a property less attractive for potential homebuyers, leading to an increased demand for rental properties. As a result, property investors can benefit from a steady stream of rental income, which can help offset the impact of higher interest rates on their overall returns.


Diversification and risk management: By remaining fully invested in a well-diversified property portfolio, investors can mitigate the risks associated with market fluctuations. Diversifying across different property types and locations can help to reduce the impact of localized market changes, providing a more stable long-term investment strategy.


Market cycles and opportunities: Property markets move in cycles, and experienced investors understand that periods of high interest rates can present unique opportunities. By staying fully invested, investors can capitalize on these opportunities, such as acquiring undervalued properties or benefitting from increased rental demand.



Why Selling Should Be a Last Resort:


Transaction costs: Selling a property involves various costs, such as agent fees, legal expenses, and potential taxes. These costs can significantly reduce the net proceeds from a sale, making it a less attractive option during periods of high interest rates. In the most recent budget personal   capital gains taxes were slashed and corporation taxes were hiked by over 30%


Loss of potential returns: By selling a property, investors lose out on the potential for future capital growth and rental income. In a rising market, this could result in significant opportunity costs, making selling a less favourable option for long-term investors.


Re-entry barriers: If investors decide to re-enter the property market after selling, they may face challenges such as higher property prices, increased borrowing costs, and stricter lending criteria. These factors can make it more difficult for investors to rebuild their portfolios and capture future growth opportunities.




While high interest rates can be concerning for residential property investors, maintaining a long-term perspective and staying fully invested in a well-diversified portfolio can help navigate these challenging times. By focusing on the potential for capital growth, steady rental income, and market opportunities, investors can build a resilient investment strategy that delivers lasting value. Selling should be considered only as a last resort, as it can involve significant costs and lost opportunities for future growth. Instead, stay the course and leverage the power of long-term property investing to weather the storm of high interest rates.

Case Study:

While writing this I looked at one of the properties we have just sourced to an investor. I wanted to  see what the picture may look like 10 years out and was quite taken aback

The property had a purchase price of £380,000 which was a mixture of HMO rental income and commercial income from a shop. Total gross income £57,000

Now normally we crunch the numbers and see what the ROI is over a 12 month period. The question one should ask is how long do I intend to hold this for – 12 or at least 120 months. I think we know the answer to that question!

That £380,000 investment if for simplicity we assume cash purchase, no future mortgage and all the rental income is banked after fees. Fees, maintenance and utilities for HMO are estimated at 40% and the commercial unit 15%

If we also assume 5% growth in capital value each year and similarly for rental.  With UK inflation at 10%, whilst we hope it does not remain at that level 5% over the longer term is very prudent

We also assume that after 5 years there is a renegotiation on the commercial lease which enables a 20% increase in rent.

Finally for the sake of this example we bank all our rental in a non interest bearing account for 10 years. Yes I know laughable, but just stick with me.


The end result is a building that should grow from £380,000 to just under £590,000 in value and up lift od £210,000 and the total net rental profits banked would be £456,000.  So in simple terms.

You put down £380,000 in bricks and mortar, over 10 years you will bank £456,000 and then sell and pocked £210,000. Drop the mike for a 175% return and hands off investment !








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