Wednesday, January 26, 2011

But… but I thought house prices could only go up???

Property investment ‘in decline’

"House price falls and the mortgage drought have led to a steep drop in the number of people who think property is the most reliable long-term investment, research has indicated. The proportion of people who think bricks and mortar is the best home for their cash fell by nearly a third during the final quarter of 2010, according to the Association of British Insurers (ABI). Only 34% of people now rate property as the best long-term investment, down from 49% in September and the lowest level since the ABI first began collecting the figures in September 2008."

Posted by mark wadsworth @ 03:04 PM (1429 views)
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5 thoughts on “But… but I thought house prices could only go up???

  • sibley's b'stard child says:

    ‘Only 34% of people now rate property as the best long-term investment, down from 49% in September and the lowest level since the ABI first began collecting the figures in September 2008’.

    Interesting stats; shame they don’t go further back than ’08. Still, reasonably objective data isomuch that it’s from YouGov.

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  • “People are increasingly putting their faith in savings and investment products, although property still remains the most popular place to invest money overall.”
    Could also be written as, “Now everyone is bricking it in case they lose their job, they are trying to save what they can, however most still have quite a lot of equity in their house”

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  • Have a friend who was spouting HP ‘investment’ mantra to me last summer. Just before Christmas, he confided that this is not the time to try buying or selling property. It’s a sample size of one, but matches this survey perfectly!

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  • “Equities have produced higher returns than bricks and mortar during nearly every 20-year investment period between 1960 and 2009. Even over the shorter term, equities have still out-performed property in 64% of five-year periods between 1960 and 2009.”

    What these figures never take into account is the leveraging effect of a high LTV mortgage, the fact that you are not marked to market and the fact that capital gains tax isn’t payable on your main residence. If you don’t want to remortgage, as long as you keep up the payments it’s no problem however much house prices fall.

    On my first house I paid a deposit of £2,600 and the price went from £52,000 in 1993 to £72,000 in 1997. That’s a tax-free rate of return I have never achieved from equities and never expect to. Even if I did I’d have to pay 40% tax on the profit.

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  • monty032 – “On my first house I paid a deposit of £2,600 and the price went from £52,000 in 1993 to £72,000 in 1997. That’s a tax-free rate of return I have never achieved from equities and never expect to. Even if I did I’d have to pay 40% tax on the profit”

    I remember someone who I knew very well at the time who had £68K cash offer on the table in 1988/9 for his house (commuting distance to London) but held out for more and 3 months later settled for £62K – by 1991 the house was valued at £42K so it sounds as if you got the timing right !

    As for paying tax on the profit from equities much of this can be legitimatly avoided or at least reduced by using a suitable collective scheme c/w appropriate tax wrapper such as ISA or onshore/offshore investment bond wrapper.

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