Investing in property can be bad for your wealth

macaque_2

With the constant roar of spin from the bulls it is easy to overlook just how bad an investment property can be. Property is not by default a bad investment but it should be part of a diversified portfolio and like all good investments, timing is the key.

It's insufficiently appreciated just how bad housing has been as an investment. Figures from Lloyds Banking Group show that average house prices in June were 30 per cent below the 2007 peak, adjusting for inflation.......

...........My chart shows this. It shows the annualized inflation-adjusted change in house prices to June 2011 for every month since 1989. This shows that even if you had bought at the very best time - January 1998 - your annualized real gain would only have been 4.3 per cent. That's before insurance and maintenance costs. Had you bought 20 years ago, your real return would have been just 2.1 per cent per year.

http://www.investorschronicle.co.uk/MarketsAndSectors/Markets/article/20110711/2f90f9c2-a885-11e0-b6c2-00144f2af8e8/Housing-a-poor-investment.jsp

HAMISH_MCTAVISH

Wow, and you had the audacity to accuse the bulls of spinning.....



I'm going to take a wild guess that the article didn't include imputed or realised rents.....

Procrastinator333

As it is compared to the "all share index" I would also assume it doesn't include dividend income.

King_Of_Bling

Procrastinator333 wrote: »

As it is compared to the "all share index" I would also assume it doesn't include dividend income.

No it doesn't , and he said that in the article.

macaque_2

HAMISH_MCTAVISH wrote: »

Wow, and you had the audacity to accuse the bulls of spinning.....

I'm going to take a wild guess that the article didn't include imputed or realised rents.....

Hamish - Hurray, there is light at the end of the tunnel.
70% Club - Hamish be careful because that light is a large black train coming straight at you!
Hamish - Thats just spin
70% Club - Hamish its a train, and its only 30 feet away. Be careful!
Hamish - You're talking rubbish because its green not black! Hahaha - I win, I win
SQUELCH

Pimperne1

This is what Chris said in Apr 2006:

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2006/04/a_housing_puzzl.html

He's one of the group of "Housepricesaretoohighandwillcrash - sometime" and when they actually don't they need to add in (in "real" terms).

michaels

Far be it from me to support Hamish on this one but...it excludes rents - if you had bought property you would have achieved an additional 5% plus pa (remember the return would be based on the yield on purchase so probably more like 10% if you had purchased earlier) in rental payments on top - I think that improves the picture for housing a lot more than adding dividends to the ftse yield! Probably one of the worst articles quoted.

(Note there is no mention of leverage - which is much easier to achieve on property than shares - so we don't need to worry about mortgage costs and if it is a house to live in rather than an investment property then there is the equivalent saving in not having to pay rent plus of course tax relief with a PPR)

* My chart excludes dividends just as it excludes rents. If you'd reinvested dividends, then housing, excluding rent, would only have out-performed shares if you'd bought between 1998 and 2001. The chart stops in June 2008, simply for aesthetic reasons; annualized returns since then have been so noisy they make the chart look ugly. Since then, though, shares have generally out-performed houses.

the_flying_pig

HAMISH_MCTAVISH wrote: »

Wow, and you had the audacity to accuse the bulls of spinning...

other than you, H - you always play with the very straightest of bats