By Mark Penston
The current ‘Baby Boomer’ generation have generally made good gains from property. Many also have good company pensions, making this generation wealthier than ever before.
But has property been a good investment in the past and what is the forecast for property growth in the future?
The Sunday Times ‘Money’ commissioned a report that analysed the growth of total household wealth in pensions and property from 2008 to 2016 drawing on data from the Office of National Statistics. Interestingly it found that the growth in pension wealth has outstripped that in property since the 2008 credit crunch in every part of the country, including London! This growth is not only due to the investment performance of pensions but also due to the fact that people are now paying more in to them. The future for property valuations remains unclear, especially with Brexit and the new political landscape still to be determined. As a firm, our belief is that continued increases in property prices are unsustainable or we will reach a position where first time buyers will never be able to enter the market.
Data from the Land Registry Office shows house prices have only grown by an average of 3% per annum since 2005. This includes an 18.6% fall in prices between April 07 and May 09.
Unlike many other nations, the British psyche is that home ownership is important. We should remember that property is primarily a place to live and not an investment. The statistics provide only facts, they do not address how people ‘feel’. They demonstrate that investing into property may be no better (or worse) than alternative investment strategies. This includes Buy-to-let property which, since recent changes in taxation legislation, is one of the least tax efficient ways to invest (as well as having other associated letting issues the owner will need to manage).