Property Sourcing > Why Property?

Why should you invest in the property market?

Asset class: An alternative asset class offering diversification from other investments. During the last thirty years, residential property has outperformed the returns generated by equities, gilts and UK commercial property.

Physical asset: A tangible asset that offers the benefits of both income and potential capital gain.

Interest rates: The low interest rate environment in the UK encourages lending against property.

Supply vs Demand: A shortage of housing in the UK; the government expects nearly 4 million new households by 2021. In 2008 there were approx. 125,000 housing starts (Savills Dec08) with a Government target of 240,000 per year. In 2009 estimates were for 35-50,000 housing starts. Supply is far behind Government targets even before the full impact of the recession. Undersupply combined with strong demand should ensure the property market remain stable in the longer term.

Mix: The wide variety and diversity of types of properties, locations and prices ensures that ones own objectives can be met.

Ability to borrow: Unlike many other forms of investment it is possible to enhance potential gains by using "gearing" (borrowing, loans, mortgages).

Pension: Property investment for some individuals can be seen as a suitable pension

Long term: Property should be seen as a medium to long term investment.

Summary of The Residential Market Opportunity

  •  Prices at 50% plus discounts to peak 2007 levels and close to build cost.
  • Prices at “75p in the £”; purchases possible at 25% plus discounts to valuations today.
  • High gross yield: 8% target: through lower prices and strong tenant demand.
  • Attractive buying opportunities due to lack of competition.
  • Underlying UK housing demand remains strong, whilst supply of new build homes falls far short of Government targets leading to long term price support.
  • Interest Rates are at historical lows, making borrowing cheap, and creating a positive yield gap for residential property investment.
  • Property is an attractive asset class with strong historical performance and lower volatility.
  • A lack of attractive alternative investment opportunities; cash, gilts, equities, hedge funds.