Property Beats Equities

the_flying_pig

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

The lady who cleaned the rooms in my student halls was obsessed with the national lottery.

She used to jot down the past winning numbers in a notebook. She believed that past performance was an indicator of how likely they were to come up in the future, e.g. that certain numbers were luckier or somehow weighted more towards being picked by the machine.

You and her could maybe get your heads together and start up some kind of investment companee.

IronWolf

Yes because houses cost absolutely nothing to maintain/repair dont they.

In 50 years your are looking at multiple redecorations, new kitchens/bathrooms.

Shares dont cost anything to hold.

DervProf

So, Hamish (and millions of other people, including myself) buy at least one property. We are fortunate(?) to be living in a country that has seen a credit boom, and where the building of new homes hasn't kept up with the rising population.

Now, Hamish clearly "gets off" on the rising value of his property (which seems rather greedy/selfish if you ask me), I feel lucky that I was able to buy my place when I did. A friend of mine has 4 kids. In a few years time the eldset will probably be looking for a place to buy/rent. If she mentions that she is struggling to find a place that she can afford, I don't think I`ll be telling her how great it is that my house has increased in value by £xxxK over the past 10 or 20 years (not that such a rise is a certainty).

Still, it'll be OK if the banks start lending again, won't it ???

IveSeenTheLight

nearlynew wrote: »

And you still live next door to a bothel.


Brilliant.

You seem to know this personally.
Are you on first name terms with the madam?

geneer

"The last 10 years."

zzzzzzzzzzzzzzzzzzzzzzzzz Property only ever goes up (c) 2006.....long term (c) 2007

julieq

Does anyone here actually understand the term "imputed rent"? That is the value over the period of residence - say 40-50 years - you can attribute to living in a house you own.

Remember that rents go up by and large with inflation so are a far higher proportion of the capital purchase price at the end of the 40 or 50 years.

And maintenance costs are small in relation to other costs. There are occasional one off spends, but divided over the period of ownership, they're not significant factors.

To be fair if rental even came close to beating purchase, we'd all be doing it. Personally I wouldn't be comparing ownership with investing in shares, that ignores the liquidity issue.

nearlynew

IveSeenTheLight wrote: »

You seem to know this personally.
Are you on first name terms with the madam?

No, i've never met Mctittish's wife

DaddyBear

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:

It is when you're born at the right time!!!!
If truth be known Hamish, its not your constant boasting about the value of your houses (barely plural) that gets my goat, its your total lack of insight.
Yes, your first house is now worth significantly more than when you bought it, however, that property was bought to live in and not as an investment. It's just pure luck that you happened to be buying in the early 1990's and it hardly makes you a financial genius.
As you've shown, you're record when it comes to investing is not very impressive. Buying in 2007 was a pretty !!!!!! decision as that property is now barely worth what you paid for it 4 years ago, and is unlikely to produce any great profit for at least another 10 years. There are many other investments that would have yielded a better profit, without the maintenance costs.

Chin up.

DaddyBear

IveSeenTheLight wrote: »

You seem to know this personally.
Are you on first name terms with the madam?

I believe she likes to be called Madam Mc T.

[Deleted User]

the_flying_pig wrote: »

The lady who cleaned the rooms in my student halls was obsessed with the national lottery.

She used to jot down the past winning numbers in a notebook. She believed that past performance was an indicator of how likely they were to come up in the future, e.g. that certain numbers were luckier or somehow weighted more towards being picked by the machine.

You and her could maybe get your heads together and start up some kind of investment companee.

The lottery is random.

Passed performance IS an indicator of future performance albeit with varying degrees of significance depending upon how uniform other variables are over time.

In the case of the lottery the external factors that could effect the outcome vary very little and so past performance over a decent sample period of time should confirm that the system is random with no bias.

There are more variables in the property market than the lottery but there is a large amount of data and past trends are statistically significant.

Incidentally, there are far more variables that effect share prices and although some use statistics to justify their purchases, there is far less statistical significance behind the trends identified. This makes them more of a gamble if you are using trend analysis alone. This can be augmented by good knowledge of the company, market, etc, etc.