Many investors are solidly committed to the principle of diversification and this can result in them opting to sell perfectly healthy investments purely to keep their portfolio appropriately balanced. Some investors also like to try out different investment classes and niches, just to keep their life interesting and hence may choose to liquidate well-performing investments simply because they have become bored with them and hence lack the enthusiasm to give their investments the attention they need.
Both of these are perfectly valid reasons for reducing or even liquidating your exposure to a certain investment class, including property. Is there, however, currently a case for liquidating a property portfolio in its entirety (or at least in substantial part).
The case for liquidation
Probably the single, biggest argument for liquidation is the prospect of Brexit which is very much an unknown quantity and, as such, is making a lot of people very nervous. To this may be added the fact that the current UK government’s attitude towards housing seems to be, at best, disjointed, as evidenced by the fact that we have had no fewer than eight housing ministers since the Conservatives returned to power in 2010.
While the government openly supports house-building (as indeed do the opposition parties), its stated policy does not always translate into meaningful practice as home developers have to work within the constraints of political strategies such as affordable housing and immigration policy. It’s also worth noting that the political trade winds currently seem to be blowing very much in the favour of residential buyers in general and first-time buyers in particular and very much against investors who have had to cope with a number of unfavourable changes in a relatively short space of time.
The case for holding (or investing further)
Although some property investors work mainly with capital gains in mind, most property investment is, ultimately, about income, meaning rental yield. This may be from residential property or commercial property, but ultimately the basic principle is the same. While residential landlords may be gritting their teeth over the raft of regulatory and tax-related changes to which they have had to adapt in recent times, there are two very pertinent facts to bear in mind. The first is that residential landlords have the option to make an orderly retreat from the residential property market and invest in the commercial property market instead.
This allows them to continue to benefit from the strength of the UK property market while operating to a more relaxed set of rules. The second is that an exodus of landlords from the residential property sector means reduced competition for tenants for those who remain and while Brexit may (or may not) lead to reduced demand for rental property, the fact is that demand is so high that there is very little real likelihood of a major slowdown in the buy-to-let sector. Indeed, it’s entirely possible that demand may increase in the near future as people put off taking out mortgages until they see what Brexit will bring.
Hopwood House are a specialist property investment company, with a large portfolio of investment opportunities including investment properties for sale in Liverpool, Manchester, Sheffield and Birmingham.