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Property Beats Equities
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HAMISH_MCTAVISH
Posts: 28,592 Forumite
The motley fool had an article last year, that amply illustrates the point, even after a crash, that property beats shares hands down.
Main points: (and I've added a couple of updates)
Over the 50 years to 2009, shares have delivered a real return of 5.2% a year, including capital gains and dividends.
Over the 50 years to 2009, property has delivered a real return of 2.7% per year in capital gains, PLUS a yield of around 5% in imputed or realised rent, for a total return of around 7.7% a year.
In the last 10 years, the case is clearer still -- even after the crash house prices are up more than 100%, whereas the FTSE 100 is still around 20% down (both figures exclude income).
The 2008 crash was the worst and fastest house price crash in history, and the annualised drop never got to 20%. Shares were down nearly 40% in the same crash.
Main points: (and I've added a couple of updates)
Over the 50 years to 2009, shares have delivered a real return of 5.2% a year, including capital gains and dividends.
Over the 50 years to 2009, property has delivered a real return of 2.7% per year in capital gains, PLUS a yield of around 5% in imputed or realised rent, for a total return of around 7.7% a year.
In the last 10 years, the case is clearer still -- even after the crash house prices are up more than 100%, whereas the FTSE 100 is still around 20% down (both figures exclude income).
The 2008 crash was the worst and fastest house price crash in history, and the annualised drop never got to 20%. Shares were down nearly 40% in the same crash.
http://www.fool.co.uk/news/investing/2009/07/22/why-property-beats-shares.aspxHere's the final reason why you should believe me.
I rent.
A few years ago I decided bombed-out shares looked better value than pricey seeming property. I didn't see that a crash in the latter would cripple the former.
With numerous acquaintances who bought in the 1990s and who've barely read a bank statement let alone the FT now paying around £500 a month for a mortgage on properties that would cost £1,500 a month to rent today -- while securing themselves an asset -- I'm painfully aware just how brainlessly good an investment property is.
Yes, house prices are wobbly. Yes, shares look great value. Sure, you have to repaint your house's walls and mend the roof to maintain value.
But I've only ever seen one person make a life-changing sum of money from scratch investing in shares (outside the City) and that was in the dotcom boom. Whereas I've seen dozens make hundreds of thousands by buying a home.
Learn from my stupidity. Vote property
“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”
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Comments
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No wonder you were so keen to bum money off your parents to buy a house.
Very astute of you McTittish."The problem with quotes on the internet is that you never know whether they are genuine or not" -
Albert Einstein0 -
No wonder you were so keen to bum money off your parents to buy a house.
Very astute of you McTittish.
Yep.
Took a 4K wedding present, added it to 6K of savings, put a deposit down on a house, and watched it grow to over 400K debt free after overpaying the mortgage for 17 years.
Bought another house, kept the first one, and have seen both grow in value since 2007 as my local market reached a new peak in 2010, whilst taking advantage of record low interest rates and paying around half the amount on a full repayment mortgage that rent would have cost since...
This property lark's easy, innit. :beer:“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »Yep.
Took a 4K wedding present, added it to 6K of savings, put a deposit down on a house, and watched it grow to over 400K debt free after overpaying the mortgage for 17 years.
Bought another house, kept the first one, and have seen both grow in value since 2007 as my local market reached a new peak in 2010, whilst taking advantage of record low interest rates and paying around half the amount on a full repayment mortgage that rent would have cost since...
This property lark's easy, innit. :beer:
And you still live next door to a bothel.
Brilliant."The problem with quotes on the internet is that you never know whether they are genuine or not" -
Albert Einstein0 -
Again, this ignores maintanance. A fair chunk of money over 50 years.
Again, this ignores void periods, and assumes 100% rental periods over 50 years.
Again, this ignores insurances.
Again, this ignores interest and I'm forever being told just how harsh interest rates were a couple of decades ago.
But they do say ignorance is bliss.0 -
GOLD
01/27/2011
16:41
1312.70
-33.40
-2.48%
Down down, deeper and down......
Gold price falling faster than property supply figures.... And property supply is falling off a cliff!!!!
No wonder the goldbugs are in a state of panic....“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »The motley fool had an article last year, that amply illustrates the point, even after a crash, that property beats shares hands down.
Main points: (and I've added a couple of updates)
Over the 50 years to 2009, shares have delivered a real return of 5.2% a year, including capital gains and dividends.
Over the 50 years to 2009, property has delivered a real return of 2.7% per year in capital gains, PLUS a yield of around 5% in imputed or realised rent, for a total return of around 7.7% a year.
In the last 10 years, the case is clearer still -- even after the crash house prices are up more than 100%, whereas the FTSE 100 is still around 20% down (both figures exclude income).
The 2008 crash was the worst and fastest house price crash in history, and the annualised drop never got to 20%. Shares were down nearly 40% in the same crash.
http://www.fool.co.uk/news/investing/2009/07/22/why-property-beats-shares.aspx
It really used to annoy me back in 2001-2003ish when I read motley fool fairly regularly that they had a massive bias towards shares. They would typically only look at HPI and ignore rental income and compare that with the FTSE 100 with re-invested dividends. There figures also never included the companies that dropped out of the index. Used to really bug me.
Nothing against shares BTW I think they're a perfectly good way of building your cashflow.
Glad to see their changing their tune.0 -
IPD has residential property net income at 2.7% for 2009. The average for the glorious boom period of 2000 to 2009.. 3.8%. Source for this 50 year average of 5%?"The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 1848.0
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IPD has residential property net income at 2.7% for 2009. The average for the glorious boom period of 2000 to 2009.. 3.8%. Source for this 50 year average of 5%?
I'm using gross, as I didn't deduct CGT from shares....
Paragon has gross yields at 6.4% for 2009.
http://www.homemove.co.uk/news/16-07-2009/average-rental-yields-positive-at-64.html
University of York has yields at more like 8% in the 90's.
http://www.jrf.org.uk/sites/files/jrf/h194.pdf
ANd this article shows yields through the decades....
http://www.ambassador-properties.co.uk/html/buy_to_let_2010.htmlSince the late 1980s, the average gross rental yields of Residential Buy-to-Let mortgages have swung from 5/6% to 10/12% in the mid 1990s, down to 4/6% in the mid 2000s, and during the late 2000s they fluctuated between 4/5%.
5% as a long term average seems pretty much spot on. :cool:“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
HAMISH_MCTAVISH wrote: »http://www.ambassador-properties.co.uk/html/buy_to_let_2010.html
5% as a long term average seems pretty much spot on. :cool:
<shakes head> I'm embarrased for you.
Source: The database of Ambassador Property Management
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Seems like MF have changed their tune.
http://www.fool.co.uk/news/investing/2011/01/27/we-still-prefer-property-to-shares.aspx?source=ufwflwlnk0000001...shares produced higher returns than property for almost all 20-year periods in the half-century between 1960 and 2009. Even over shorter periods, equities are the top-performing asset, coming top in almost two-thirds (64%) of all five-year periods in the past 50 years.In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:0
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