Archive | October, 2012

Property is a great investment

6 Oct

Property is one of those great investments that provide both capital gains and income.

On average property will double in value every 7 – 10 years.  I know many people will doubt this especially with the current economic crisis and the headlines that hit the papers almost every day.  But let’s take a look at a property I purchased in 2001.  It is a three bedroom semi-detached house which I bought in 2001 for £39,900.  Assuming prices double every 10 years by 2011 the value of the house should be £79800 and by 2021 it should be worth £159600. 

However, in 2007 the property was valued at £125,000.  This was before the credit crunch, but today with the drop in house prices it is still valued at £110,000.  With headlines of property has dropped in value 2.5% in 3 months I can understand peoples concern.  But the house I bought in 2001 would need to drop by 68% to be near 2001 house prices.  This is highly unlikely.

A few years ago my I was driving past a house that was up for sale with my step-dad.   He told me he had bought it for £2,000 and sold it for £4,000 and thought he had done very well at the time.  When I got home I checked the price and found it up for sale at £269,000.  My step-father was 79 years old at the time. I don’t know when he bought the property but if we assume he was 20 that is nearly 6 decades ago.  Allowing for house prices to double every 10 years the value of the house would have been £4000 first decade, Decade 2 would be £8,000. Decade 3 would be £16,000. Decade 4 would be £32,000. Decade 5 the value would be £64,000 and in Decade 6 is would be £128,000.  The house was £269,000 despite all the up’s and downs, recessions and depressions over 60 years.

This is one of the reasons why I say there is never a bad time to buy property.  Yes it will go up and yes it will go down.  But historical figures show that regardless of the economic circumstances on average house prices will double every 10 years.

The second reason I say buy now is that Britain is an Island.  It is not creating land but is losing land due to erosion from the sea and rising sea levels.  We are running out of land to build on.

And the third reason to buy now is the population is growing rapidly.  There was a target population of 70 million people in the UK by 2050.  Last week it was reported the population is growing 4.5 times faster than projected.  Where are these people going to live?

The fourth reason to buy now is building new houses is not meeting demand.  There will be a cronic shortage of housing in the very near future.  It is interesting in my region the lack of rental properties available. If the demand is there now where will it be in a few years time? 

And finally, I know we covered property for income last week but it is still worth mentioning again as demand grows for more housing then rents will go up.  In my property business I get at least 10 enquiries a day for two and three bedroom houses.  My properties are full.

So in my experience the best time to buy property is now.  Property is a great investment for capital gains and income.