Should I invest in property during a recession?
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Whether we’re in, approaching or avoiding recession appears to be quite a hotly debated topic amongst politicians and economists right now, but what we can probably confidently say is that the UK economy is experiencing some turbulence thanks to a multitude of factors, and with this in mind, many are asking the question ‘should I invest in property during a recession?’.
This turbulence comes as a result of firstly, and perhaps most obviously, Covid and the economic impact of enormous financial support for the country during the lockdown, and secondly, the war in Ukraine that has driven prices up around the world for raw materials such as wheat and oil, driving inflation and increasing the cost of government borrowing with it.
Finally, government decisions in recent budgets and financial statements last year didn’t do a great deal to calm a nervy market, although the bulk of the damage appears to have been repaired with the chancellor, Jeremy Hunt, announcing a reversal of the majority of those measures.
That sets the context for our question, but now let’s answer it.
Should I invest in property during a recession?
Ultimately, most will consider investing during a recession something of a risky business. That being said, any investment is ultimately a risk-balancing act.
As Warren Buffet famously said, “Bad news is an investor’s best friend, it lets you buy a slice of the future at a marked-down price”.
Thankfully for property investors, property prices aren’t falling, they’re still increasing according to Zoopla, albeit at a slower rate than during the pandemic.
Overall, UK property is one of the safest investments you can make right now, with stocks, shares, crypto and other investment avenues faltering.
Whilst most assets will likely decrease during a recession, UK property tends to stay fairly resilient and avoids the wild swings in value often seen in the stock markets, currency and other markets.
One thing that appears to set the UK property market aside in this regard, however, is how remarkably consistent rental income stays during even severe recessions across the world.
The fundamentals of the market remain true despite volatility in the wider economy – there simply isn’t enough supply to satisfy the demand for housing, and this isn’t likely to change in the near future, with house building nowhere near where it needs to be to meet this demand.
Realistically, there aren’t many assets that will hold their value or increase in value during a recession, aside from property. Not only an asset that will increase in value, but also one that will provide a healthy and increasing passive income.
That’s without considering the rise in asset price when you buy off-plan property, which tends to increase in value in the time that you purchase and the time it’s completed.
All in all, there are no guarantees when it comes to investing, and everybody’s investment goals will be different, but if you’re in a place where you can afford to invest in property to reap the rewards, then there aren’t many better places to put your money during a recession.
Invest with Knight Knox
Whether you’re a first-time investor looking to enter the market or an investor looking to build on an established portfolio, we can help.
With almost 20 years of experience under our belts, we are perfectly positioned to give our clients a personal service to ensure that their buy-to-let investment needs are met and make the buy-to-let process as simple as possible.