Many Loughborough people ponder the best places to invest
their hard-earned savings and the best piece of advice I can give you is to do
your homework and speak to lots of people. It depends on your attitude to risk versus
reward. Normally, the lower the risk, the lower the reward whilst a higher risk
is normally associated with the possibility of higher returns, yet nothing
is guaranteed. At the same time, higher risk also means higher possible
losses on your investment - yet if one looks at the bigger picture, the biggest
threat to investing, predominantly when the investment is made in the
short term, isn’t risk but actually volatility.
So where should you invest? Building society, the stock
market, gold or property are options. This article isn’t designed to give you
advice – just show you how different investments have performed over the last
decade.
Let me start with the humble semi-detached house in Loughborough which in 2009 was worth £154,600. So assuming I bought that property for
that figure, then I looked at would have happened if I had invested the same amount of money in
a building society; into gold; and finally the stock market:
Savings Account
|
Gold
|
Stock Market
|
Loughborough Semi Detached
House
|
|
2009 capital
|
£154,600
|
£154,600
|
£154,600
|
£154,600
|
2019 capital
|
£154,600
|
£196,200
|
£201,300
|
£211,000
|
2019 capital &
interest/rent
|
£192,500
|
£196,200
|
£269,000
|
£305,400
|
Putting your money into the stock market (FTSE100) would
have brought a return of 30.2% on your capital over those 10 years and an
average of 3.79% a year in dividends (making an overall increase of 74%).
Gold doesn’t earn interest – yet it has increased in value
by 26.9% over the same 10 years whilst putting your money in the building society,
the money hasn’t increased in value, but would have earned you interest of
24.46% or the equivalent of 2.21% per year.
Investing in an average semi-detached house in Loughborough
over the last 10 years has seen the capital increase by 36% (an equivalent of 3.12%
per annum) and the income (i.e. the rent) has provided a return, based on the original
purchase price, of 97.54% or the annual equivalent of 7.04%. Thus meaning the
overall return, based on the original purchase price of an average semi-detached
property in Loughborough, is 10.16% per annum.
Notwithstanding No.11 Downing Street’s grab at the profits
of buy to let landlords by hitting the buy to let sector with several fiscal punishments
with a 3% stamp duty level, a decrease in high rate tax relief for landlords
and an increase in rate of CGT on residential property profits, the facts remain
that ‘bricks and mortar’ is still one of the preeminent and most constant
investments available.
The bottom line is, the buy to let investment remains the mainstay
of the British property market, serving to support aspiring homeowners as they
work to conquer the, sometimes difficult, financial obstacles of home
ownership. With Central Government over the last 30 years only paying lip
service to address the lack of new homes being built or tackling the affordability
on a consequential scale, it is highly probable this will continue for the next
5, 10, to 15 years as there will always be a call for a respectable, and above all, honest
buy to let landlords delivering decent housing to those that need it.
If you would like to discuss the Loughborough property market or chat about any potential investment please feel free to call us on 01509 260777 or email me.
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