In the end it comes down to simple supply and demand. Demand for property is increasing with changes in society – there are many smaller family units and singles who want to live alone, a trend that is set to continue. And demand for property is increasing with the explosion of legal immigration, especially from the newly acceded states of the EU.
On the other side of the equation supply can’t keep up. Despite Kate Barker’s call a few years ago for a significant increase in the number of new houses being built, it just hasn’t happened. This isn’t an easy problem to solve and will take a lot of political will to enforce and it is questionable whether, in reality, the politicians have the inclination to see it through. But each year as we ponder the problem, the cumulative short fall of new build properties is increasing. And added to that, some would argue that a significant proportion of the new properties that have been built are the wrong type of property in the wrong place. Hence the over abundance in some city centres of empty, new build, two bedroom apartments.
All in all I suggest that by any measure property is still the best long-term investment. Just look at the graph. Imagine owning a property for thirty years and then think about how much equity you have. Just think of what the return on your own money invested would be if you had geared up to buy it, in other words, if you had paid the deposit but borrowed the rest of the purchase price.
Now take that thought one stage further and imagine if, every so often, you had borrowed out some of the increase in your equity and used that as a deposit to buy another property. And then that property had also compounded in value. Suppose you took out the equity from both properties whenever you could and reinvested it in new properties, and so on and so on.
Now you are in a position where not only are the values of the individual properties compounding but also the number of properties that you own! If you keep following this process of withdrawing available equity and reinvesting it then by the time you get to thirty years you will have numerous multiple properties, all compounding in value. You’ll have, in all probability, a multi million pound portfolio, all grown from the single seed of one property that you allowed to grow in value over time.
Now I hope you can see why, when I’m told I’ve missed the boat when it comes to making money in property I just smile, shrug my shoulders and walk away. Because I know I have the seeds of great fortune quietly growing and multiplying even whilst I sleep. All I need to do is be patient and wait.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor