According to Arthur Young, who wrote on agriculture and the economy during the Industrial Revolution of the late 18th and early 19th centuries: ‘The magic of property turns sand to gold’. All these years on - he wrote that in 1792 - we’re still spellbound by that magic. As investors we want to turn the sand of our cash and savings into gold through purchasing property.
So, setting aside the fact that we all need somewhere to live, what are the benefits to a bricks and mortar investment?
Any investment carries a risk and property is no different – prices could fall.
But, with demand high and the population increasing, properties are resilient and values often bounce back stronger than ever after dips. This Is Money showed that over a 30-year period equities had enjoyed strong growth yet, when you look at the period post-2000 property reigns supreme.
The article stated that £100,000 invested in property over the 15 years since the turn of the millennium would’ve brought in a 132% return – well above the 83% from UK equities. That’s even in a period with a boom, bust and recovery.
Tastes and trends may come and go when it comes to other investments but, with property, the need for a home clearly endures.
Any form of investment requires a little knowledge to get the most from it.
Yet, with property, much of that is more straightforward. We understand what property is, why it is popular and can easily track changes in its price. Many other investments can be trickier to get your head around and keep on top of.
A property portfolio offers flexibility. You could, for example, choose to rent out a series of homes and collect a strong yield. The average yield is almost 6%, while about one in ten properties has a yield above 10%. Alternatively, if the market conditions are right you could cash in and sell your properties for a tidy profit. The important thing to do is to get your timing right and pick the right locations. Remember, the best yield might not be in the same town or city as the place with the best price growth. Do thorough research and work out which option is best for you.
A property portfolio need not simply be restricted to these shores. Overseas markets offer opportunities for excellent returns – with locations and styles that simply do not exist in the UK. Browse the likes of FT Property Listings to see what you can invest in abroad and, provided you do your research, you could add a lucrative addition to your portfolio. Properties in tourist hotspots can earn a great yield in rent and, in the long run, could serve as a great holiday getaway or retirement bolthole.
One other thing to consider is the cost. Lenders are operating in a highly competitive market at the moment, with good deals available to fund a buy-to-let purchase, for example. With pension rules now relaxed too, it is well worth exploring whether a property might perform better for you than the other investment choices you have available when you come to the end of your time in work.
With demand strong – and long lasting – and the chance for a flexible form of investment that can take in overseas markets and utilise favourable lending conditions, a property portfolio is certainly a smart choice to make the most of your money.