Housing Could Offer Reasonable Long Term Returns - PWC

wotsthat

According to new analysis by PwC, investment in housing could offer a projected real return (including net rental income) of around 3% per annum over the period to 2025. Housing is significantly riskier than index-linked gilts but offers lower risk and expected return levels than equities.

This reflects the fact that, while demand for housing may not be as strong as in recent decades, UK housing supply will remain constrained.

Our analysis suggests that the prospective return on housing in the period to 2025, while not as good as many people have got used to in recent decades, could be broadly similar in terms of both risk and expected return to a balanced mix of index-linked gilts and equities.

http://www.ukmediacentre.pwc.com/News-Releases/Housing-could-offer-reasonable-long-term-returns-despite-short-term-weakness-12a1.aspx

chewmylegoff

if that is the case the i will be buying index-linked gilts and equities, as you don't have to talk to them and go to the effort of buying them a new washing machine when it breaks down.

chewmylegoff

wotsthat wrote: »

Of course you'll have to buy those gilts and shares yourself. If you get into BTL, and are happy to get rich slowly, then someone else will be buying your assets for you.

I always think that BTL looks less attractive when the hassle factor is taken into account. At least with shares you can go on holiday and not worry about them although once when I was away an oil platform in which I had an interest exploded!

well i suppose i could just say "my tescos shares have paid a 5% dividend this year and i reinvested it in more tescos shares" whoopeee someone else is buying my tescos shares for me.

HAMISH_MCTAVISH

chewmylegoff wrote: »

you don't have to talk to them and go to the effort of buying them a new washing machine when it breaks down.

True.

But they also don't buy themselves for you.

Within 25 years a BTL will pay for itself, and refund you your 25% deposit.

You can't say that about Tesco shares, starting from a non leveraged base of the BTL deposit equivalent.

wotsthat

chewmylegoff wrote: »

well i suppose i could just say "my tescos shares have paid a 5% dividend this year and i reinvested it in more tescos shares" whoopeee someone else is buying my tescos shares for me.

I might try that way of thinking. It could make shopping in Tesco slightly more bearable knowing that everyone that keeps getting in my way is contributing to my dividend payments.

chewmylegoff

HAMISH_MCTAVISH wrote: »

True.

But they also don't buy themselves for you.

Within 25 years a BTL will pay for itself, and refund you your 25% deposit.

You can't say that about Tesco shares, starting from a non leveraged base of the BTL deposit equivalent.

if i leverage my investment in tescos shares, then what is the difference?

buy something using partially borrowed money, use the profits to pay off the debt, asset has, according to you "bought itself".

leverage is not a magical quality only available for property investments (although it may be somewhat less risky for property investments as you can get relatively cheap insurance to cover the risk of most of the events which might cause the value of the property asset to fall to zero).

Graham_Devon

I'd imagine a decent savings account (you will have to switch each year probably) will provide a better rate than 3% per annum over the next 13 years.

You can get accounts for around 3% now.

CLAPTON

Graham_Devon wrote: »

I'd imagine a decent savings account (you will have to switch each year probably) will provide a better rate than 3% per annum over the next 13 years.

You can get accounts for around 3% now.

the report say

According to new analysis by PwC, investment in housing could offer a projected real return (including net rental income) of around 3% per annum over the period to 2025. Housing is significantly riskier than index-linked gilts but offers lower risk and expected return levels than equities.

(my underlining)

shortchanged_2

Good to see that PWC are saying what I have been saying for a long time.

BTL ain't the great investment it is made out to be particularly if people got into it since around 2006. So I exclude chucknorris and others who got into it pre boom because they were always going to be on to a good thing once house prices rocketed. So they not only have plenty of equity they probably have very small mortgages as well.

chewmylegoff

shortchanged wrote: »

Good to see that PWC are saying what I have been saying for a long time.

BTL ain't the great investment it is made out to be particularly if people got into it since around 2006. So I exclude chucknorris and others who got into it pre boom because they were always going to be on to a good thing once house prices rocketed. So they not only have plenty of equity they probably have very small mortgages as well.

3% p.a. real return isn't too shabby really, especially as the returns have index-linked like characteristics.

the main problem for me from the point of view of investing in property directly (i.e. by me buying a house and renting it out) is the lack of diversification. i.e. i could only afford one, and if it went wrong that is a bit hit to take. that and the fact that you cannot really fire and forget as you can with fund investments.

shortchanged_2

chewmylegoff wrote: »

3% p.a. real return isn't too shabby really, especially as the returns have index-linked like characteristics.

the main problem for me from the point of view of investing in property directly (i.e. by me buying a house and renting it out) is the lack of diversification. i.e. i could only afford one, and if it went wrong that is a bit hit to take. that and the fact that you cannot really fire and forget as you can with fund investments.

Yes but it's also not the dogs danglies either and when you factor in the added hassles of being a LL, is it really worth it?