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Managing my investments
Managing my investments

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2.4.4 What are the risks?

Described image
Figure 13 Although the long-term trend for UK house prices is upward, the last 40 years have seen periods when prices fell (source: Nationwide Building Society, 2023).
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The figure is a line graph showing the movement in average UK house prices measured in real terms (i.e. after taking account of retail price inflation) between 1985 and 2023. The figure also shows the trend line for real house prices. While the movement in real house prices displays a number of peaks and troughs the trend line for the period as a whole is clearly upwards.

Figure 13 Although the long-term trend for UK house prices is upward, the last 40 years have seen periods when prices fell (source: ...

Suppose you own a property as an investment.

Activity 2.6 Property risks

What are the risks of using that property as an investment rather than as a home? What are the risks of letting out the property?

Note your thoughts below.

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Discussion

The risks of letting out an investment property include:

  • property prices falling – something that can and does happen when economic activity is weak
  • the landlord being unable to find tenants for the rental property for a period of time
  • higher than anticipated costs on the property (for instance, on maintenance or renovation).

These risks reinforce the need for careful calculations and expert advice.