Thursday, Feb 01, 2007
Other than cash property worse performing asset class in 2006
Firstrung: Precious metals have been the best performing asset class in two out of the past five years
Clerical Medical calculates that precious metals* were the best performing asset class in 2006 with a 28% return for the year - ahead of UK shares (17%) and international shares (16%). In 2005 commodities were the best performers with a 23% return, marginally outperforming UK shares (22%).
Posted by converted lurker @ 10:39 AM (148 views) Add Comment
3 Comments
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1. Nohpc said...
so what .. you can't live in a house of gold . A home is just that A home for you and your family. If it goes up in value great and if it doesn't who cares? This is why prices won't crash.. people will always need homes but not gold or shares.
2. Sceptic said...
Hi,
As always with these articles they fail to mention the gearing of property investments. This makes them meaningless. For a buy-to-let investor, if you assume that they have a 25% deposit (50,000) on a 200,000 house, and their mortgage covers costs, then even if there is no yield at all from the property and the property goes up by 10% they will have made 20,000 on an investment of 50,000, which is a return of 40%. Even if costs (stamp duty/fees) take 10,000 out of the profit, that's still a 20% profit. However these are one-off costs will which not be incurred in following years.
This profit will be subject to CGT when selling the house, will it not? If this takes say 5,000 off the profit that's still 30% in a year which is much better than shares. Shares are only likely to beat property if geared investments are used (eg spread bets or investment in geared funds). Such investments though are much riskier than property which will nearly always go up in the long term. Even if house prices rise at 3%/year, assuming a yield of 4%, again you're looking at a good investment. If prices fall, well you can hang on and they'll come back up again in the long run, which isn't always the case with shares.
Thoughts?
Sceptic
3. Nohpc said...
Yes.. exactly what I was thinking but couldn't put it quite so intelligently. People on here say you are better off investing 300000 in stocks and shares rather than property but the point is you couldn't get that money to invest in stocks and shares and you only need 30 to 60 thou down payment to get the returns on 300000