The ‘British Dream’ is in bricks and mortar.
Although there’s no direct British comparison to the American Dream, if there were it would be a property related one. British people love buying property – it’s the most significant aspiration that most Brits have. And this predisposition towards buying, as opposed to renting, is one of the reasons why the British property market is now so pricey. Some Brits will invest in property over and above anything else – you’ll even find those who have forgone a pension and put their cash into property instead. But where does this obsession come from and is it really wise?
Why the Brits love property
Home ownership in the UK peaked at 71% in 2003. Although this figure has now reduced somewhat to closer to 60% that’s still a fairly hefty number of Brits who have property in their name (or, at least, they borrow money on a loan in the form of a mortgage in their name). Other European countries, such as France and Germany, aren’t that far behind to be fair with around 50% of people owning their own home. However, it’s in the UK where buying property has gone beyond just putting a roof over someone’s head and become the number one way to invest and grow capital too.
Property is still a sound investment
No doubt the UK property market has hit a few obstacles in recent months with growth slowing and fewer transactions taking place. Some people are even predicting that the next step is a housing price crash in 2 – 5 years. Then there are the recent changes made aimed at reducing the number of property investors in the UK – for example, buy-to-let landlords now enjoy far less attractive tax breaks than they used to and greater difficulty with secured loans to cover their costs. And yet, despite this, Brits continue to put their cash into property – or to aspire to do it, for those who can’t yet get onto the property ladder.
What are the benefits of property investing that make it so attractive?
A physical asset – investing in a property gives you a physical asset to show for the cash that you have dedicated to your investment. That will always provide a tangible benefit, whether you choose to occupy it yourself, rent it or sell it on.
The potential for cash flow – investing in property can provide income for many years. Rents in the UK have experienced a serious period of growth as property supply dwindles. As a result, the average UK rent is now £921, more than enough to cover a mortgage repayment with change to spare.
The increase in value – there are few investments that offer the kind of attractive returns that property does. Not only is there the rental yield to take into consideration but the potential profit from an increase in value too. The property market has – on the whole – only gone upwards for decades and, despite the scare stories of a crash, there is very little chance of it declining substantially and permanently now. Investors can put time and effort into renovating properties to increase their value when sold on – or simply sit on the investment and watch it become more valuable.