UK residential property has been the best performing asset class in the last 50 years according to the Barclays Capital Equity Guilt Study & ODPM housing statistics. These figures showed that in real terms (after inflation) £100 invested in a portfolio of shares in 1930 would have grown to a little over £363 by the end of 2004 compared with £767 if that same amount had been invested in residential property.There are a number of reasons why professional investment funds have stayed away from direct investment in residential property. Firstly, the whole area of private landlordism has been a real ‘political hot potato’ up until the last 10 years. Housing was seen by some members of the political classes as something not to be profited from, like the NHS. The very idea of private investors making money out of peoples need for housing was seen as morally wrong.Find more info on property javea the Most Reliable Place.
As a consequence the Labour Party for years had introduced a whole series of restrictive Rent Acts, which prevented landlords charging market rent as well as obtaining vacant possession. An investment in an asset that the investor was prevented from selling at its true market value (with vacant possession) was obviously not something the institutions wanted to get involved in.The other factor that put them off was the relative intensiveness of the management process. An investment fund can invest £5+ million in a single commercial building, with one tenant who remains for 25 years. A comparable sum invested in a residential property could involve having to buy and set up say 50 individual properties at £100,000 each. Then each of these properties & tenancies would have to be managed, all this is time consuming and expensive.As a result of this ambivalence to the sector, very little effort has been put into research that compares residential investment performance against other asset classes.
Further details on how investment in residential property compares against other investment classes can be found in the Landlords Bible.There are a number of reasons why it always good to have a range of investments. If you already have a large ‘buy-to-let’ portfolio of residential property without much of your assets invested elsewhere, you may wish to consider diversifying your investments. The classic phrase is ‘don’t carry all your eggs in one basket’. Investing is much the same. Whilst over the years I have always held most of my assets in residential property; I have also held a proportion in alternatives such as shares and deposit accounts. As an active investor I am always looking for new and innovative methods for diversifying my portfolio. The theory is that if one investment isn’t doing so well, as was the case for shares for a number of years. Then some of the other investments are doing a lot better. The result you hope is that overall your capital keeps on growing.