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Property Instead Of Pensions

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Thanks largely to Gordon Brown, people are seeing property - BTL - as a future pension.

However, I'd thought that in the longer term, if history repeats itself - and I'm not personally convinced it will - property only rises just above the rate of inflation: or, has done, over a 25 year term. I thought I remembered reading that property outperforms inflation by about 2% in the long term.

Clearly if you bought in, say, 1995 and sold in 2003, you would have seen a much better return. If you bought in 1989 and sold in 1997, you would not. If the booms in the property market were never reversed off partly or wholly in the corresponding bust which always follows, property would perform much better, which is why overall a retained element of each boom means it outperforms inflation - but not by much in the long term.

We hear BTL is in it for the long term and for professional investors I'm sure this is true. Of the areas I've monitored, the same BTL properties pop back up for sale every 6 and 12 months at regular intervals at a fishing/ludicrous price, then presumably find a tenant and round the cycle goes again. That area is a prime BTL area and precisely the sort of area that professional investors would probably steer well clear of: new builds. I do not believe that the majority of these BTL investors are really in it for the long term and it won't take much in the way of IR rises and void periods for them to make a more concerted effort at a sale. In any event:

If history is to be repeated, this might well lead people to conclude that property is indeed safer than a pension. But then this ought to stand to reason: pensions had a little more risk, but that was because of the reward necessary to make the thing actually work.

If property only just grows a little ahead of inflation, and the majority of BTL is being financed by IO mortgages: doesn't this make it necessary for leverage to come into play: in that a single BTL property as a pension is going to leave an individual quite poor in their old age even if property continues to grow in the same manner in the long term, so it is necessary to leverage and build a portfolio of several properties?

If that's the case, is that safer than a pension: what do posters think of the risk vs reward element and will this small scale type of "personal BTL" actually work for these people assuming that in 25 years property has continued on roughly the same path as the last 25?

Or, is it the case that people are forgetting the need to take inflation into account, looking at only the nominal price rises over the last few years, and using that as the basis for believing it is an automatic path to riches?

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Guest mattsta1964

Thanks largely to Gordon Brown, people are seeing property - BTL - as a future pension.

However, I'd thought that in the longer term, if history repeats itself - and I'm not personally convinced it will - property only rises just above the rate of inflation: or, has done, over a 25 year term. I thought I remembered reading that property outperforms inflation by about 2% in the long term.

Clearly if you bought in, say, 1995 and sold in 2003, you would have seen a much better return. If you bought in 1989 and sold in 1997, you would not. If the booms in the property market were never reversed off partly or wholly in the corresponding bust which always follows, property would perform much better, which is why overall a retained element of each boom means it outperforms inflation - but not by much in the long term.

We hear BTL is in it for the long term and for professional investors I'm sure this is true. Of the areas I've monitored, the same BTL properties pop back up for sale every 6 and 12 months at regular intervals at a fishing/ludicrous price, then presumably find a tenant and round the cycle goes again. That area is a prime BTL area and precisely the sort of area that professional investors would probably steer well clear of: new builds. I do not believe that the majority of these BTL investors are really in it for the long term and it won't take much in the way of IR rises and void periods for them to make a more concerted effort at a sale. In any event:

If history is to be repeated, this might well lead people to conclude that property is indeed safer than a pension. But then this ought to stand to reason: pensions had a little more risk, but that was because of the reward necessary to make the thing actually work.

If property only just grows a little ahead of inflation, and the majority of BTL is being financed by IO mortgages: doesn't this make it necessary for leverage to come into play: in that a single BTL property as a pension is going to leave an individual quite poor in their old age even if property continues to grow in the same manner in the long term, so it is necessary to leverage and build a portfolio of several properties?

If that's the case, is that safer than a pension: what do posters think of the risk vs reward element and will this small scale type of "personal BTL" actually work for these people assuming that in 25 years property has continued on roughly the same path as the last 25?

Or, is it the case that people are forgetting the need to take inflation into account, looking at only the nominal price rises over the last few years, and using that as the basis for believing it is an automatic path to riches?

House price inflation must be matched by a sustainable growth in economic activity for it generate a real return

Seeing as this country couldn't even make a coat hanger for a profit and relies totally on an ever expanding bubble of borrowed cash, the idea that property will be a successful long term investment is just nonsense. The UK will be a 3rd world country in 10 years, crippled by debt it can never repay.

EMIGRATE

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Thanks largely to Gordon Brown, people are seeing property - BTL - as a future pension.

However, I'd thought that in the longer term, if history repeats itself - and I'm not personally convinced it will - property only rises just above the rate of inflation: or, has done, over a 25 year term. I thought I remembered reading that property outperforms inflation by about 2% in the long term.

Clearly if you bought in, say, 1995 and sold in 2003, you would have seen a much better return. If you bought in 1989 and sold in 1997, you would not. If the booms in the property market were never reversed off partly or wholly in the corresponding bust which always follows, property would perform much better, which is why overall a retained element of each boom means it outperforms inflation - but not by much in the long term.

We hear BTL is in it for the long term and for professional investors I'm sure this is true. Of the areas I've monitored, the same BTL properties pop back up for sale every 6 and 12 months at regular intervals at a fishing/ludicrous price, then presumably find a tenant and round the cycle goes again. That area is a prime BTL area and precisely the sort of area that professional investors would probably steer well clear of: new builds. I do not believe that the majority of these BTL investors are really in it for the long term and it won't take much in the way of IR rises and void periods for them to make a more concerted effort at a sale. In any event:

If history is to be repeated, this might well lead people to conclude that property is indeed safer than a pension. But then this ought to stand to reason: pensions had a little more risk, but that was because of the reward necessary to make the thing actually work.

If property only just grows a little ahead of inflation, and the majority of BTL is being financed by IO mortgages: doesn't this make it necessary for leverage to come into play: in that a single BTL property as a pension is going to leave an individual quite poor in their old age even if property continues to grow in the same manner in the long term, so it is necessary to leverage and build a portfolio of several properties?

If that's the case, is that safer than a pension: what do posters think of the risk vs reward element and will this small scale type of "personal BTL" actually work for these people assuming that in 25 years property has continued on roughly the same path as the last 25?

Or, is it the case that people are forgetting the need to take inflation into account, looking at only the nominal price rises over the last few years, and using that as the basis for believing it is an automatic path to riches?

You have only accounted for capital growth here and not rental yield.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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