Now, in terms of curiosity, all investors will be wondering which investment will give the better return, and our buycurious investor will be wondering about the relative merits of property against any other type of investment.
So let’s instantly dismiss deposit accounts and savings accounts from our list. Many banks are not even bothering to pay interest if you have less than £100,000 deposited, or unless you tie your money into an ISA or similar, when you may be able to get 3½% or thereabouts, although even that return is only possible because of the tax breaks that come with it. Comparing with property on a like for like basis, as we need to assume that our property returns will be taxable, this will reduce the ISA rate down to 2.8% for a standard rate tax payer. Not even worth getting out of bed for.
So what about the stock market instead? Are stocks and shares a better option than property? Many would tell us so, but let’s think about this.
In 2008 the FTSE lost approximately 36% in value whereas property values declined on average, depending upon which index you consult, around 16%. So there you are, property wins hands down. Put your money into property and you’ll lose far less.
Now, of course, I’m not being serious. I wouldn’t advise anyone to base their investment strategy on planning to lose less in property. “Oh look, darling. We only lost 16% on our property investments this year. We were so clever not to put our money in the stock market! We’re at least 20% better off than we would have been if we had”.
We have to assume our buycurious investor is primarily curious as to which investment will give the greater return and not interested in which will result in the smaller loss. Accordingly, our buycurious investor would be well advised to look longer term to get a better idea of which investment is likely to perform.
Here are the facts. The FTSE 100 peaked at 6930 on December 30th 1999, and then fell and stayed at or below that level for over a decade. In fact, the 1999 peak was only surpassed on 24th February 2015 when the FTSE reached 6949 and, at the time of writing in April 2015, now stands at only 7057.
By comparison, at December 31st 1999 the Nationwide House Price Index (Seasonal Regional Quarterly Index UK Property) stood at 149.7 and, at the time of writing, stands at 380.3.
So, it’s taken the stock market fifteen years to get back to 1999 levels, but the property market has gained 254%.
So I know where I’d rather have put my money.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor