Saving for a House Deposit

r2014

Hello,

Like so many people I have some capital which I intend to use as a deposit on a house in 1-2 years time when I have enough.

As savers chase a potential housing boom with savings rates staggering behind... the wanna be home owner could be chasing their tail as the goal posts move.

For this reason I ask has anybody has any experience of residential property investment funds or trackers?

I am aware of the following as examples:
- Castle Trust's HouSA fund
- TM Hearthstone UK Residential Property fund

TBH I'm a little suprised MSE :money: hasn't covered this as an option (at least I can't find it).... considering saving for a deposit is a very common financial goal.

Any comments on these types of funds as an option is welcome.

innovate

Investing into any fund when you need your money in 1-2 years time is extremely high risk. Which is fine if you are of the disposition to take extremely high risks. Leaving the risk aside, I am not sure it follows that someone who wants to buy property would also invest in property funds - talk about all your eggs in one basket etc.

Most first time buyers, and other savers with a short-term need for money stick to cash.

MSE will never recommend any specific funds because this would constitute financial advise which MSE is not authorised to give.

bigadaj

I can understand the ops concern and desire to look into these products as on the face of it they would be just hedging their risk on property as their primary focus.

With any such fund you need to research them in detail and for example costs can be high and the focus if the fund or the exact property index being followed needs to be considered.

Bizarrely it might make some sense to make a bet on house prices to form such a hedge, as this would balance any house price increases if correctly set and could be tax free or at least tax paid.

marathonic

I would hate to provide financial advice to someone and tell them to invest in these products if property prices happened to fall. Just when the market gets really cheap and bargains start appearing, you realise that your deposit is also obliterated.

r2014

I agree that it is putting all your eggs in one basket. But so is ploughing your life savings into the deposit on your own home.

I would have thought investing into a diversified domestic residential property fund would be considered less risk.

Yes if the property market crashes your investment will fall. But it should therefore have the same "property" buying power(ish)?

Wilkins

In principle you would be hedging against fluctuations in property prices. It seems fine in theory, but I would want to check out very thoroughly the reliability of any property funds you choose, in terms of costs (how much do the managers take?), tracking error (does the fund value vary in ways similar to property prices in your area?) and general regulatory risk.