YourLocalInvestment
25th September, 2017

 

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Property is an asset class with strong fundamentals for future capital growth. There are many reasons why we believe that property is THE best investment vehicle for long term wealth.

 

History

History tells us that property is one of the soundest and most powerful investment vehicles available. Since records began in the 1950’s property has performed remarkably, doubling in value every 7-10 years on average. According to The Halifax plc: UK property prices have risen in 36 out of the past 40 years, seeing an average annual increase of 10.3%. History is not the only performance indicator; demand for property is at a very high point currently.

 

Shortage

All three political parties agree that Britain faces a shortage of new homes due to its rising population and a rise in household numbers as more people live alone. The Office for National Statistics says the population will grow by more than four million to nearly 65 million by 2020, of which almost 12 million will be aged under 30. The number of new households grew 4.2 million between 1981 and 2008 even as the population grew by just 1.8 million. Yet the UK builds fewer new homes each year than almost anywhere else in Europe. The current shortfall is around 120,000 new homes per annum according to the 2003 Barker Report, by 2021 the Halifax predicts that the shortfall will have reached 400,000 per annum.

 

Capital Growth

Historically, house prices have doubled every 7 years. We only source houses needing refurbishment, this in turn adds to the value, pushing up the capital appreciation of the asset. Generally speaking the UK housing market in 2013 remains weak and any sign of recovery is fundamentally fragile. Housing market indices across the eight major commentators are erratic, with some showing small rises whilst others are showing more declines during the second half of 2012. These fluctuations are typical during the first stages of recovery. We expect that this will continue for the foreseeable future. It is difficult to predict when we will see a full return to sustained growth, but it will come thanks to the market’s strong underlying fundamentals. This means that the next few years are likely to be a pivotal time for property investment in the UK. This will be helped by a long term economic recovery that will see more pronounced rising in house prices starting in London and the south-east  and then spreading to other economic centres. History tells us that the value of the property will always return and increase over time: we can then start re-mortgaging and taking tax free money again.

 

Buy to Let

Due to the current stringent lending restrictions imposed by the banks the renting sector is booming like never before. Higher life expectancy, high level of immigration and a growing number of single occupant households all add up to a huge demand for rental properties. Strong levels of tenant demand are here to stay, particularly given the Government’s planned changes to social housing. We are turning into a nation of renters and this will provide the continued stimulus for the growth of buy-to-let lending. Additionally, more and more people now view property as a long term investment; the average length of holding an investment property is now at fourteen years. Increasing demand for private rental property is one of the few areas that commentators agree on at the moment and consensus is that there remains a significant opportunity for investors in the buy to let arena.

 

Bricks and Mortar

Property has long been viewed as a strategic investment that can ride out economic cycles. Historically, investors in the UK value a property asset high in their portfolios, as it offers the potential for better returns and exhibits a “brick and mortar” characteristic that are not found in intangible assets like securities. Ninety per cent of the world’s wealth is made or held in property.Property has always been an attractive and good performing asset class and offers the potential for high capital appreciation as well as attractive yields. The returns can be quite dramatic as investors have the ability to leverage easily and can rely on future earnings to repay the debt.