You may ask yourself why should I be investing in property? The answer is, because it is a major, tangible asset that gives you far greater control over your financial future. In comparison to other investments property has performed well for UK investors for almost thirty of the past forty years. The returns far outstrip most other types of investments. Check out our market statistics section to see the evidence for yourself.
Historically, residential property has doubled in price every 7 years and should therefore be viewed as at least a medium-term if not long-term investment. Although there has been at times short term fluctuations in market prices, property has always provided a consistent long term store of value for anyone who owns it.
There are a number of different reasons why residential values have seen such strong growth, but most of them come back to the simple economic principle of supply and demand - there is an overall shortage of suitable housing in most parts of the United Kingdom.
This housing shortage has been caused by a number of social and demographic factors, including:
- House building at its lowest level since 1924, as the gap between supply and demand widens by 60,000 each year.
- An average of 220,000 extra households created each year through longer life span, increased solo living (whether from choice or an increasing divorce rate), and an increasing number of students in higher education away from the parental home.
- Low unemployment, low interest rates and low inflation.
Don’t Leave Your Financial Future To Chance
In contrast, the past 5 years have seen shares and pension schemes performing poorly as the public has witnessed one scandal after another. This has left many people worried about their future financial security because, with the demise of final salary pension schemes, they are no longer guaranteed a comfortable retirement income.
Confidence in the Government and the financial services industry is at an all time low and unlikely to change in the foreseeable future. Shares (and therefore pensions) are still very volatile and have never been a low risk investment option. Government sponsored tax-free investments like ISAs have quite low maximum allowable values and will not in themselves lead to financial freedom.
Large financial institutions and pension funds are now investing more heavily
in property (particularly commercial) because it offers sound long-term gains
with minimal risk, compared with exposure to the Stock Market.
The Power of Leverage
Leverage is the term used to describe the investing of little or none of your own money to obtain substantial financial gains. Because of the widespread availability of Buy-to-Let mortgages, investors are able to leverage their money and achieve massive percentage gains from a relatively small investment.
When purchasing property, it is normally possible to borrow money from a lending institution. The majority of lenders will advance up to 85% of an investment property's value, therefore allowing you to build a portfolio of properties with a personal investment of as little as 15% of the total purchase price, provided of course you buy correctly.
In some cases the discount negotiated by IPM can be used to subsidise the capital required on a buy to let mortgage. In most cases the deposit is paid for in part, or sometimes in full, by the discount offered.
