| Property: to invest or not to invest
As the private rented sector booms many people may be thinking of swapping their low-interest savings accounts for a potentially higher return on investment by purchasing property. Think twice. Small but steady returnThe yield is low, anywhere between three and 10 percent gross and you do need to allow for management and other costs, but historically it has proved to still be the very best hedge against inflation of any other asset class. Long term returnThe return on investment on residential property over the last 100 years has been better than any other asset class including commercial property, equity or bonds. Loosely regulatedThe legal structure surrounding landlords and tenants has only been in place since the Housing Act of 1988 - before that it was virtually impossible to let residential properties on a commercial basis. Tenant demand is high. Secure for the futureGood quality residential properties will last indefinitely if they're well maintained. Renting - the new buyingFactors such as high employment mobility, continued restrictions in the mortgage market plus the high transaction cost of buying (deposit, stamp duty, etc. DemandThe population is growing at a fast rate whereas house building is at its lowest since the 1920's so supply and demand is very positive. Fairly secureEven in hard times, people can make sacrifices in other areas to make certain that they're able to pay the rent. More is betterHolding a portfolio of residential property spreads the risk as each asset is relatively small. Next week I'll be looking at the do's and don'ts of investing for all those fairly new to the private rented sector and those thinking about a move into the market after weighing up the pros and cons above. |
Thursday, 7 June 2012
Property: to invest or not to invest
