The FTSE came into being in 1983 and was based at 1000 on 31st December 1983 meaning the index has grown by 400% to the present day. In the meantime the Nationwide Index (SRQI) has increased from 59.5 to 300.2, an increase of 504%, and the Halifax Seasonally Adjusted Index has risen from 102.3 to 535.4, an increase of over 535%.
Ah, advocates of stocks will say, but you haven’t reflected the returns from dividends. True, but we also haven’t allowed for returns from rent.
And, don’t forget, to some extent the FTSE is a flawed index anyway because underperforming companies are regularly removed and replaced by companies on the way up. Property indices don’t enjoy such favourable treatment. If city centre apartments are not performing well they are not discarded from the index and replaced by a property type which is performing. All the figures, good and bad, go into the mix. It would be interesting to see what the FTSE would stand at today if the system of periodic substitution of the poor performers had not been adopted. I’m guessing that there would be many less than the original 100 companies left in the Index, with more than a handful having ceased trading.
Which brings me around to another advantage of property over stocks and shares. The companies behind the stocks and shares can and do go broke, or stop trading, and can disappear. But once you own a property, you have a tangible asset which will not disappear. Okay, it’s true it could burn to the ground or collapse in an earthquake, but hopefully you will be covered by insurance. And even if some calamitous event did destroy the building, you will still have arguably the most valuable component of your investment, the land it sits on.
So not only does property offer the best long term returns by far, when compared to the stock market, despite what the stock junkies and housepricecrash devotees might tell you, but it is tangible and has intrinsic value in it’s own right. In other words, not only is it one of the best, if not the best performing investments available, it is one of the most secure.
No matter that over the last couple of years property has shown some volatility. Any serious study confirms that the market, like most financial markets, is cyclical and although nothing is ever guaranteed, any serious buycurious investor will be assuming that the market will recover in time. At some point in the future they will be assuming that prices will again catch up with the long term growth trend line.
Adopting the “buy cheap and sell high” model, most buycurious investors will surely linger only for a moment on the possibilities of buying anything other than property, knowing that all other things being equal, property will again be the star performer. In years to come, buying property will not be a decision that causes undue anxiety.
With anecdotal evidence that the property market is now beginning to move again, being backed by solid statistics to support this view, the only curiosity to a well advised investor is how many properties they can buy at rock bottom prices before this buying opportunity passes.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor