Residential property: is now a good time to invest?

As commercial property remains under the cosh, there’s evidence of buoyancy in the residential secto

As commercial property remains under the cosh, there’s evidence of buoyancy in the residential sector. Picture: Getty Images - Credit: Getty Images

As commercial property remains under the cosh, there’s evidence of buoyancy in the residential sector, says Peter Sharkey.

We Britons might be a nation of shopkeepers, but we’re a pretty canny lot when it comes to keeping a close eye on property values too.

According to last week’s Investors Chronicle, more than one third (35%) of the UK’s net household wealth is held in residential property. Only private pension saving is bigger (42%), although up to half of that is held in funds investing in commercial and other non-residential property.

Those readers who have invested in open-ended property funds (which, in turn, invest primarily in commercial, industrial and office property) will have experienced a worrying phenomenon twice in recent years.

In 2016, several large open-ended property funds prevented investors from withdrawing their money following the Brexit vote as managers (and some investors) mistakenly believed the sky was about to fall in. More recently, trading in the majority of these funds was again suspended due to ‘material uncertainty’ regarding asset values as lockdown approached.

Earlier this week, the Financial Conduct Authority (FCA) suggested that investors wishing to withdraw their cash from open-ended property funds should wait for up to six months before they redeem their investment, a proposal that will hardly enhance the appeal of commercial property funds.

The FCA maintain that longer notice periods will reduce the likelihood of investors being prevented from accessing their money and “eliminate the potential for some investors to gain at the expense of others,” though it could make the fund ineligible for stocks and shares ISAs.

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As the commercial sector struggles, does the residential market offer the prospect of better returns for investors? Possibly.

Internet property portal Zoopla reported recently that around 124,000 property sales, worth £27 billion, were lost when the pandemic’s unwanted grip put life on hold. The market shutdown resulted in 20% fewer property sales during the first six months of 2020 compared with the same period a year ago.

Nevertheless, the temporary stamp duty holiday introduced last month has undoubtedly breathed life into the residential property market. One estate agent suggested that some buyers were currently picking up ‘bargains’ as frustrated sellers, many of whom have had their homes on the market since before lockdown, were prepared to negotiate on price. Once the stamp duty saving is taken into account, some buyers are benefiting to the tune of £10,000-plus.

It’s worth noting that the stamp duty holiday (it runs to 31 March 2021) does not technically extend to those interested in entering the buy-to-let (BTL) market where gross rental returns pepper the 5% mark. Anyone buying a second home, including investment property valued at up to £500,000, must still pay 3% stamp duty. Scandalous, perhaps, but is it worthwhile?

The BTL sector is not everyone’s cup of tea, but as suspensions and the prospect of extended notice of withdrawal periods make commercial property funds appear less attractive, it might be worth exploring the sector’s merits.

Many homeowners aged 55 and above wishing to invest in the sector start with one enormous advantage: they may use a proportion of the wealth accumulated in their own bricks-and-mortar as a deposit with which to acquire a BTL property (or even buy a property outright), thus adding an asset and a potentially useful source of extra monthly income in the form of rent.

For example, a couple aged 65 in good health with a home valued at £250,000 could release tax-free equity of around £75,000 from their property and, should they so choose, not have anything to repay on the cash they release.

Equity release offers one alternative, but a product known as ‘retirement interest-only mortgages’, often referred to in the snazzy acronym format, RIOs, is another. These mortgages are targeted at older borrowers who are usually liable for monthly interest (which could be covered by rent and still leave a cash surplus), though there’s not normally a need to repay the capital.

Who knows how the commercial property sector will fare in the longer-term should high street retailers continue to struggle and city centre offices remain empty as people continue to work from home. Prudent sorts, many of whom have witnessed first-hand the residential property market’s regular fluctuations may be considering such a scenario for the commercial sector and tentatively exploring the possible advantages of creating a residential property investment portfolio.

If you’re considering equity release, a RIO, or property investment of some form, please get in touch. My email address is

Drop Peter Sharkey a line!

Readers can email Peter Sharkey (and his team of equity release experts) to ask any equity release-related questions. Contact Peter by emailing:

As many readers have already discovered, there’s a wealth of information to be discovered at: . In addition, there are hundreds of blogs and articles dealing with the subject on the Moneymapp website, including Peter Sharkey’s weekly blog, rated among the UK’s very best. Read more at:

You may still email any queries or questions regarding equity release to:

Please note that neither or Peter Sharkey can advise readers on whether equity release is suitable for them. However, both and Peter can introduce readers to professional advisers who will explain the process and its implications for your estate and entitlement to means-tested state benefits.

For more financial advice, check out Peter Sharkey’s regular column, The Week In Numbers.

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