For the vast majority of people buying a property for a home will be the biggest financial decision they will ever make, and also the best one. It does seem to be more of a “British” thing than a European one though as a far higher percentage of Europeans are happy to rent their homes and don’t see owning a property to be as important as the British do. Sometimes in periodic downturns in the market some people start to wonder if this concept is flawed but just by looking at a few facts we can easily prove that this is not the case.
The Property Market has consistently shown appreciation over the years. Real estate has generally appreciated about 5% a year overall. Having 5% down on a 200,000 house is an investment of 10,000. That house would increase about 10,000 to 11,000 for the first year in normal growth years. Earning 10,000 on an investment of 10,000 is equivalent to 100% earnings which would be virtually impossible to do in the stock market unless you were extremely lucky.
Putting 10,000 in to stock market and seeing a 5% gain which would be an average year, you would see 500 profit. In an average year it’s easy to see that the property market is a much better investment and this just compounds over years. Regularly as clockwork there are property booms which virtually double the property market value in the space of a couple of years but these are exceptional rather the the norm. Expect 5% year on year and you’ll not be disappointed.
There will always be blips and temporary downturns in the market. These are always caused by other economic factors such as Government Policy, Oil Prices, what our American Friends have been up to, etc. This could be difficult for new homeowners who may be stretched a little but if you’re an established home owner then you just don’t try to move during these periods and wait for the good times to return.
Here’s another example of how the property market is the best and most consistent investment over time. Let’s say a semi detached house was worth 80,000 in 1997. The value of that house today would be in the region of 150,000. Your investment in that house could have been as little as 4,000. If yu had invested that 4,000 in the stock market in 1997 you would now be worth around 7,800. Where would you rather have had your money?
The beauty of the property market is that home values tend to increase more or less steadily over the period of time. There are spikes and troughs but these are nowhere near as dramatic as those when you are dealing with stocks and shares. It is a true fact that the housing market has NEVER yet failed to recover from a slump in prices. The British attitude to owning property will always ensure that this remains constant.
If people are careful about when to trade up on their property they can also avoid the necessity of paying Capital Gains Tax which means over the years a person can develop a small house into a much larger one or even a portfolio of properties without paying Capital Gains Tax. Tax free investments is definitely the way to go!
Currently there is quite a bit of Doom and Gloom around. If you are purchasing during this period probably some really good bargains can be had as some people who were possibly a little imprudent may have to sell their property to clear some debts. Don’t be put off by all the bad news around at the moment, this is yet another in a long line of property price blips and those who have no real need to move can just sit tight and the market will recover as sure as the tide will come in. What’s important is to get the mortgage that is right for you. There are different types of mortgages out there and it’s important to get the best advice on what is the best mortgage for your particular circumstances.
If you are in your home already and your finances are getting a little stretched by the current downturn in the economy then why not consider a debt consolidation mortgage? You can really reduce your monthly outgoings as opposed to paying monthly credit card bills and the like.