Investing in a Turbulent Market
It's hard not to be sceptical about the wisdom of investing in property in a year when the newspapers are full of doom and gloom - so here's just a few facts to balance the argument on both sides...
Shock-horror! Newspapers don't always get it right.
In the year 2000, the BBC reported "Warning of house price collapse" - but prices actually went up 12%. In 2001, The Daily Mail told us, "House Prices 'Sure to Plunge'" - and then they went up by 7.4%. In 2002, The Times told us that in London, "Big Spenders Holding Off" - before prices lifted by 11.5%. And in 2003 The Evening Standard forewarned, "House Price Boom is Over" - just before prices skyrocketed by a further 22.4%.
Year on year, prices kept going up in 2004, 2005, 2006 and 2007 - all whilst the newspapers continued to report doom & gloom. Lets just wait and see what happens in 2008.
A fabulous track record
UK property doubles in value on average every ten years - and even faster in greater London and other boom-areas such as the South East. No other asset category achieves this performance. So long as you're investing over a 5-10yr period, even the worst property slumps will smooth-out and take you back into healthy profit. Even those who invested in 1989 - the peak year before the 1990's price crash - had made a healthy 11% return just 10 years later - and if they'd held on to their property until last year, they would have made a whopping 258% return.
The miracle of Gearing, Leveraging & Other People's Money
Call it what you will, the ability to use a small deposit to borrow a hefty investment fund means you can spend small and invest big. You won't find many high-street banks offering the same deal to help you buy stocks & shares, and that's because they know what we know - over the long term, property only ever goes up.
Under supply
Simply put, the UK needs more houses. Demographic trends such as delayed marriage and high divorce rates mean ever-increasing demand for new houses - up to 120,000 additional houses each year according to the Government's Barker Report. At the same time, the actual number of houses being built is decreasing. High demand and low supply only means one thing over the long term - rising prices.
In great company:
23% of the 2007 Sunday Times top 1000 Rich List list their wealth-source as 'Property' - far more than any other category. In the last decade, tens of thousands of new millionaires have been created through property assets - with some sources quoting a rate of 50 new millionaires a day. When taking an investment decision, it's always nice to be in the company of so many like-minded seriously wealthy people.
AND ONE LAST THING...
When do you think the best moment to secure the best deal is? Now, whilst the market is twitchy and buyers are scarce - or in a few months time, when the credit crunch recedes and buyers pile back into the market? Don't always follow the crowd - make up your own mind about your own investments.