Solar panels - Deborah Meaden

Doozergirl

It's not a 10% return because you don't have the money anymore, but an asset that is slowly depreciating on your roof. They may pay for themselves, they may even turn a small profit, with inflation hmm, but they aren't really an investment opportunity.

Doozergirl

alun4 wrote: »

Possibly, but I am still concerned of the value of this free energy. If you contract, is it not a 25 year "hold" over your freehold property?

That's a different scheme. The 'free' energy with the 25 year contract is only free if you're At home to use it when it's sunny or programme appliances to work during the sunny parts of a day. You're not able to store it in any form. I don't think it's worth the small saving for the tie in.

Porcupine

Other thing to remember is this is (alleged) 10% ROI, not 10% growth. You might get 10% revenue, but your capital will have gone. At the end of the term (which may be less than 25 years) the panels will only be good for throwing in the skip. An investment may have a lower yield but will (hope to) preserve your capital. Doing the sums, the yield on an equivalent investment would have to be:

25 years: growth 9.6%
20 years: 9.1%
15 years: 8.0%
10 years: 4.8%
5 years: -9.4%

In other words, at 10% ROI the breakeven point would be 7.5 years, all other things being equal. (They aren't, FIT payments are index linked)

Ark_Welder

alun4 wrote: »

Possibly, but I am still concerned of the value of this free energy. If you contract, is it not a 25 year "hold" over your freehold property?

The property can be sold. The new owner has to agree with the FIT-receiver to allow the scheme to continue to the conclusion of the 25-year term. During that time the new owner has the opportunity to benefit from the possible energy savings.

alun4

Ark_Welder wrote: »

The property can be sold. The new owner has to agree with the FIT-receiver to allow the scheme to continue to the conclusion of the 25-year term. During that time the new owner has the opportunity to benefit from the possible energy savings.

Yes, I appreciate the property could be sold but would it not be like having "an encumbrance" or "restrictive covenant". Some potential buyers may not mind (or even welcome) but others in .... 20 years may not. The aesthetics of the panels worry me!

DavidLaGuardia

alun4 wrote: »

To me they are very unsightly and I wonder if they would put someone off buying the house (so a possible reduction in value?)

Obviously your opinion, but if they became the norm I suspect you will get used to it. Think about telegraph poles and phone wires in a street, these are among the most visually jarring things but few of us would batter an eyelid to them now.

edinburgher

Other thing to remember is this is (alleged) 10% ROI, not 10% growth. You might get 10% revenue, but your capital will have gone. At the end of the term (which may be less than 25 years) the panels will only be good for throwing in the skip.

Good point, adds to the argument for not treating them as a 'standard' investment.

Then again, if there's a break-even of, say, 8 years and you actually earn the FITs for 20 years, this could still be a great opportunity for people with a suitable site and a wad of cash languishing in a savings account.

edinburgher

we have several clients who have taken out loans or added the cost to their mortgage, as the banks know it’s a guaranteed no risk loan.

In my opinion, this adds an additional degree of complexity that makes them even less suitable for the average investor.

In my example (money sitting in an ISA at a few %), the purchaser no longer has their capital, but gets a dramatically improved return vs the 2-3% they were getting on it previously (say a 7% improvement if we're optimistic).

With your example, the fact that the money is borrowed means that the return drops quite a bit unless the purchaser has access to a very cheap mortgage (say 2.5%). This allows for an optimistic return of 7.5%, which is great for mortgage holders who've been on the ladder for a while. Not so good for someone who's just bought a house (say 5% mortgage, so 5% return).

5% return would be very good for an ISA etc. where you retained the capital, but for a system that you need to have installed on your roof, will require at least some maintenance and will get less efficient with time, I'd rather stick the money in an ISA. I'd also argue that someone who's just bought a house is far less able to see what the future holds for them in terms of staying there vs someone who bought a house 10 years ago and is used to it.

So good for some, but not good for everyone

ChopperST

Are they not installed as standard as part of new build properties now? Surely that makes the most financial sense in the long term???

edinburgher

Are they not installed as standard as part of new build properties now? Surely that makes the most financial sense in the long term???

Not that I'm aware of (elder brother bought a new build house a few months ago and none of the properties in the large development he's in have one). Also, we're hoping to buy next year and the 2-3 developments we've looked at haven't had any...