I firmly believe that property investment is a great investment and when you look at the long term trends it’s far from risky, especially when compared with the alternatives.
- The UK is set to suffer a severe shortage of property and very high demand over the next 20 years
- There will always be a demand for rental properties
- Historically property has always delivered great returns over time
The UK has a tradition of home ownership. Between 1971 and 2002 it increased from 49% to 69%.
However, there will always be a need for rental property, due to economic factors, lifestyle and a moveable jobs market. The average age of a first time buyer, who is not given financial help, is now 37.
You can see there will always be a demand for rental accommodation.
The UK population of 61.4 million today will rise to 71.6 million by 2033. This will put massive pressure on housing stock. The predicted shortage is 750,000 homes by 2025. Short supply will impact rental values.
With finance much tighter, the banks’ reluctant to lend and house price confidence shaky, it’s never been more important to make your money work when you buy an investment property.
You achieve this by buying Below Market Value (BMV). Get this right and you will have an income producing asset – from a property that historical data from Halifax PLC has shown doubles every 7 – 10 years.
There is no guarantee that such fantastic growth will continue. No one would deny that we have seen an adjustment in the housing market since it overheated in 2007.
But even if the current economic pressures in the UK move this cycle to a longer timeframe, if you have invested wisely you will still benefit from passive income – which boosts your income. Plus because you bought BMV you have instant equity in your property.
“But I like my money in the bank. I get a statement each month and I know it’s there.”
Yes that’s very true – but here’s the thing:
- The best rate paid by a bank to tie up your cash in a two year bond is 4.05%.
- A simple deposit account pays 3.15%.
- Inflation is running at a conservative 5.7%
So in actual fact you are losing at best 1.7% or at worst 2.6% per cent on your savings. Every year!
Is that a good investment?
Kathryn says
February 22, 2012 at 10:10 pmInteresting article regarding potential growth in the rental market over the next few years.
The rental value of property seems to be comparable wherever you live in the UK for like for like property, except London of course. But the purchase price of property seems to vary much more throughout the country.
Wish property prices were as cheap down south as they are up North!
iain says
February 23, 2012 at 5:47 pmThanks for you comment Kathryn. Yields are usually higher in the north because of the low capital values. Typically we would expect yields of at least 10-12%