Yahoo Finance How long should you keep a property before selling?
We asked the property experts how long you should stay living in a property if you want to maximise your return.
Recent research by Middleton Advisors found that, if you want a return on your investment, the optimum time you should stay living in a property before selling it is nine years.
“UK residential property is unusual insomuch as — on average — the longer the holding period, the greater the annual capital growth: 7.7% after a 3-year hold, 8.0% after nine years and 8.7% after 20 years,” says Mark Parkinson, MD of Middleton Advisors.
“Nine years is a long-enough time to allow markets to recover from a downward cycle. So, even if you buy at the peak — i.e. right before a price correction — in every housing cycle since December 1962, prices would have recovered sufficiently after nine years to give you a positive nominal return.”
The research also found that the time people stay living at a property has increased in recent history.
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“There has been a marked change in the average holding period since the global financial crisis of 2007/8. In the 10 years prior, average holding periods were as short as 13 years. Since then, the average holding period has increased significantly and currently stands as 22 years,” Parkinson added.
Jeremy Leaf, a former RICS Residential Chairman, agrees that property is a good investment in the medium term. “Residential property has proven to be a very good hedge against inflation for many years, particularly as no tax is payable on one’s own residence when you come to sell.”
But, in order not to be liable for tax, the property does need to be your main residence for a sustained amount of time.
“You will need to occupy the property and have it nominated as your principal residence for a period of around two years in order to benefit from private residence relief and therefore not pay capital gains tax,” advises Marc Schneiderman of Arlington Residential.
Does property really double every 10 years?
While Middleton Advisors’ research suggests that if you hold onto a property for nine years, it will go up in value, it’s often quoted that property doubles every 10 years.
Our experts had mixed views on whether this was the case.
“Weirdly it kind of does! The trajectory was higher for the last few years, but the current downturn may well even things out. Just remember, with property, nothing is guaranteed,” says property expert Jonathan Rolande.
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Parkinson disagrees: “I don’t think you can rely on this adage across the country. This has always been said about the London market, in particular, but it depends where you are in the market cycle. For prime country I have just bought the same house privately that I bought for the vendors 20 years ago for almost exactly double the price.”
Gary Hemming of ABC Finance thinks that even if this urban myth was true previously, it’s not going to be the case in the future as house prices have outpaced earnings by such a significant amount.
“While it’s hard to say for sure, it seems unlikely as property prices are now over 12 times the national average income and interest rates have been so low for so long that, if house prices increase any further against the average income, then property simply ceases to be an affordable purchase,” he says.
So, if you ignore the 10-year rule, what factors do the experts think play into how long one should stay living at a property?
Stamp duty
Buying and selling costs have significantly increased over the last few years, especially since 2014 when the rate of stamp duty land tax was altered. Stamp duty is usually the single, biggest cost when buying a property and you need to consider this when deciding the best time to sell.
“It is extremely expensive to move now and people are making these decisions more carefully than before and/or exploring options such as adding space in their current home if possible, such as loft conversations and extensions,” says Billy Harvey at Lurot Brand.
“Stamp duty costs have reduced people’s mobility,” says Christian Warman of Tedworth Property. “It is now very expensive to move house in London, with costs of up to 20% of the property’s value on a high-value like-for-like purchase, by the time stamp duty, legal fees, professional advice and estate agents’ fees are calculated.”
Read more: Interest rates: A guide to 'mortgage hopping' to get the best deal for your property
Alex Woodleigh Smith of AWS Prime suggests you should only consider selling once the property’s value has increased beyond the amount of stamp duty you paid.
“Essentially, at this juncture, you’ve covered your upfront costs,” he says. “However, with stamp duty relatively high compared to historical benchmarks, it’s no wonder that many of our clients are purchasing with a more long-term view than we’ve seen before.
“In many cases, our clients are missing out the 'in-between' property and stretching to the long-term property now, to avoid doubling-up on stamp duty.”
Labour mobility
An increase in labour mobility has meant that people are having to buy and sell their homes as the location of where they work changes.
Most notably this has happened recently during the pandemic when many people found they no longer had to travel into an office every day.
“There is increased mobility in the labour market with people moving for job opportunities and career advancement,” says Niamh Eadie of A Most Unlikely Builder.
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“Also, with significant changes in market conditions and property prices, both growth and decline, this motivates people to move for better, larger homes, or downsizing and relocating to more affordable areas. We have also seen movement to outside city centres with the rise in flexible working arrangements such as working from home.”
Personal reasons
Of course, how long you stay in your property is often determined by factors other than financial.
“Often people will retain a property for personal reasons, such as being close to family, or remaining in the catchment area of good schools, if they have children,” says Eadie.
In contrast, you might need to move before you otherwise would want to due to an external factor, says Woodleigh Smith.
“A change in family circumstances such as a death or divorce, or life stages — simply the need to downsize or look for more space — are often the reason. These factors are equally as important as financial motivations.”
Watch: How much money do I need to buy a house?
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