Golden era of property is over – claim

An investment firm is warning landlords and homeowners against relying on property for wealth gains.

New research from Rathbones claims the golden era of property is over.

The analysis highlights that between 1980 and 2016, house prices rose by an average of 6.7% per year nationally and 8.5% per year in London, supported by a generational decline in interest rates and limited housebuilding.

But that has changed 2016, with London house prices rising just 1.3% a year, 2.2 percentage points below inflation.

Average UK house prices outside London only just kept pace with inflation, in contrast to the preceding three decades, according to the research.

Unlike residential property, equities continued to rise by more than inflation; a simple mix of 25% UK and 75% global stocks has risen 3.4 percentage points a year above inflation since 2016.

The research highlights that people are better off investing in the stock market than relying on property.

Rathbones highlights that many buy-to-lets, and second properties are being rendered ‘unviable’ as businesses due to high interest rates, toughening regulation, and slowing prices.

The analysis suggests that £100 invested in London property in 2016 today worth £111, compared to same amount invested in stocks worth £174.

Oliver Jones, head of asset allocation at Rathbones, said:

“The idea that you can’t go wrong with bricks and mortar just isn’t true.

“The data shows that diversified global investment has put to shame returns from housing over the last decade – and we believe this trend will continue.”  

“The earlier boom in house prices was fuelled by factors which no longer hold. 

“The huge decline in interest rates from their generational high in the early 1980s won’t be repeated. Homebuilding is rising after decades of very low rates. And government policy has become progressively less favourable to investors in residential property since the mid-2010s.  The idea that money is safest in houses simply is not true any more.” 

Ade Babatunde, associate financial planning director at Rathbones, added:

“We’re being asked by many people who own second properties and buy-to-lets whether the time has come to sell up and invest their money instead.

“This research should be a wake up call to anyone relying on property to support their financial ambitions, especially when thinking about retirement or succession planning. The old idea that property will always deliver is for the birds and we strongly recommend taking advice.”  

Kindly shared by EstateAgentTODAY Image courtesy of Adobe