Bricks and Mortar: Why buying property is still a great ideaOff By Ed Hanna
Even though it’s the most traditional investment of them all, buying property is still a great idea that can set you up to receive handsome returns.
Hard-headed investors might tell you to keep emotions out of your investment decisions – and perhaps if you’re buying a valuable piece of dreadful modern art or stocks and shares, they’d be right. Property is slightly different, especially if you’re not just looking to gain from it, but live in it.
More gentle, yet not less sound advice, where property is concerned, might be to buy what you love. Assuming you buy at the right price, having fallen in love with a property should more-or-less guarantee that in the event of your wanting to sell it, somebody else will too – leaving you without a problem.
A quick look at the housing market metrics for the first few months of 2018 will tell you that house prices got off to a relatively slow start but in the context of long-term trends, we can read that as something of a blip. Besides, the London market and properties worth £1m plus are most affected – or in other words, the top or elite end of the market, so let’s just relax.
According to data produced by mortgage lender, Halifax (February 2018) the average price of a home in Britain fell 0.6% in January to £223,285. It followed a 0.8% drop in prices in December 2017 and drove down annual house price growth to 2.2%, the slowest rate in six months. Since we’re talking about a domestic investment, this is actually good news because if you’re swift and can action your property purchase quickly, you might just save yourself a few quid before prices inevitably start to rise again – and once you’re on the property ladder, you’re on!
In fact, the achievement of getting a ‘foothold’ on the ladder is disproportionately difficult to actually staying on or even climbing the said ‘ladder’. (Fortunately, there are schemes available that support members of the Forces community.) For the most part though, property is a relatively easy (and relatively safe) investment to make. You won’t need to use complicated mathematics or take ‘high rolling’ risks; perhaps that’s the difference between investment and gambling.
Sure, property isn’t about getting rich quick. Unless there are highly unusual circumstances, such as accidentally striking oil in your backyard, property is a long-term investment. Values of property do fluctuate and there’ll continue to be periods when prices rise aggressively before plateauing or even falling. Even so, one property expert I read about recalls that he was happily selling two bedroom flats in Putney, south-west London, for around £90,000 (in 1990) – and would now expect to find them valued at around £530,000 today, less than 30 years later.
There’s no reason to assume that that trend isn’t going to continue. After all, more of us are living and working longer and that means a squeeze on available housing stock – and that means that prices are likely to continue to increase. As in the Putney example, you could find yourself living in a family home, at least until your own kids have fledged the nest. Another great aspect of investing in property is that since you’re living in it, you’re actively maintaining it. You’ll probably be keeping it looking good and modernising it as necessary over the years, perhaps even adding features such as an extension or conservatory to it. All of these, usually make for a proportionally positive return, should you ever wish to sell.
Whilst there’s likely to be a long time between buying your first property and selling up and moving into your ‘final’ property, it’s good to know that the ‘nest egg’ you’ve created simply by keeping up the mortgage gives you a number of options in later life. You might, for example, look to retire sooner than you’d originally anticipated, in which case downsizing (selling up and purchasing a smaller home) or even equity release (whereby you effectively sell a portion of your home) could help. You might even opt to split your investment in two by selling your home and purchasing two smaller ones – one to live in and perhaps, one to let out, providing you with a regular income – or you could simply leave your home as a legacy in your will.
It all starts with a decision to invest in property.
Getting on the ladder…
Shared ownership is designed to make that first step of getting onto the property ladder possible by enabling an initial purchase for part of the home. While repaying a manageable monthly mortgage amount for part of your property – usually between 25%-75% – you continue to pay rent on the rest. The aim is to purchase the remaining shares over time, eventually owning 100% of your home.
Forces Help To Buy
The FHTB scheme allows Service personnel to borrow an interest-free advance of up to 50% of their salary (to a limit of £25,000), which they can use towards a deposit on a property. This is then paid back over 10 years through their monthly salary.