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House prices have risen 700% in the past 30 years. That means every £1,000 invested in property in 1985 would be worth £7,000 today. Back in 1985 the average UK property price was around £31,000.
If you’d bought a property back then, it’d now be worth £217,000 on average - 7 times your original investment.
However, what you don’t hear about so often is that if you invested that £31,000 back in 1985 in a medium-risk portfolio of UK Gilts (50%) UK equities (35%) and International equities (15%) then you’d have done significantly better. Your investment would now be worth £465,000 - 15 times your original investment.
Both look fully/overpriced now. So what happens next?
If you’d bought a property back then, it’d now be worth £217,000 on average - 7 times your original investment.
However, what you don’t hear about so often is that if you invested that £31,000 back in 1985 in a medium-risk portfolio of UK Gilts (50%) UK equities (35%) and International equities (15%) then you’d have done significantly better. Your investment would now be worth £465,000 - 15 times your original investment.
Both look fully/overpriced now. So what happens next?
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Replies: 17
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plenty pros got burned stockmarket just this year
up 15% |
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my 1985 house has only risen 412.5%
 I agree with the first part of your last line and am clueless on the last answer [but would like to know it] |
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What are the running and maintenance costs of a house over 30 years?
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Much of the hype around home ownership and the money that can be made from
it underestimates the true cost of owning a home. This is because most people are just comparing the cost they bought the property for with the price they sold it for to give the “profit” figure. Consider that if you buy a property for £500,000 and live in it for 10 years, you’ll probably have spent almost £205,000 in extra costs that you might not have accounted for. This means if you bought a £500,000 house and sold it in 10 years, you’d need to sell it for at least £705,000 before you could break even. The reason we all make this mistake is because we spend the money on our home gradually. Things like monthly interest are factored in as an ongoing cost. Stamp duty and solicitors’ fees come out at the time of purchase, meaning that we fail to mentally account for those costs. https://www.nutmeg.com/property-vs-stocks |
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so, 30 years = ca. 600K
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that 205K comes from 136K mortgage interest, 50K maintenance & repairs, 3.5K insurance and 15K stamp duty
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205k extra costs
do you wallpaper bedrooms in gold flake  |
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Picking and choosing which financial stuff and which funds to invest in for a comparison, is like aftertiming on the horses.
Not to mention choosing the timeframe into the bargain. |
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The example is based upon a 400K property, with a 450K mortgage at 3.5%
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500K property
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I thought that was a reasonable bonds/shares split for comparison. Many would have much more shares, with more risk.
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Just buy pints
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Famine next - buy a farm - grow your own food.
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I would say the OP’s 50/50 allocation is a modest (and therefore fair) representation of what somebody may have invested in.
Do the investment figures take into account charges & fees (which were much higher in the eighties than now) as that could make a significant difference to the final figure and makes a fair comparison. Also, on the other side I am assuming that it takes dividends into account? |
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It's not made clear. You'd hope that they have taken those things into account. The impact of re-invested dividends is very signifcant.
You can download the document from the link above. You can put in a fake email address e.g. a@a.com and download it From 1985-2015 The FTSE all share went up by ca 5 times http://www.telegraph.co.uk/finance/markets/9196093/Graphic-50-years-of-the-FTSE-All-Share-index.html The DOW Jones looks like it went up by ca 8 times http://www.tradingeconomics.com/united-states/stock-market You could do some calculations here http://www.online-calculators.co.uk/interest/compoundinterest.php |
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It's not made clear. You'd hope that they have taken those things into account. The impact of re-invested dividends is very signifcant.
You can download the document from the link above. You can put in a fake email address e.g. a@a.com and download it From 1985-2015 The FTSE all share went up by ca 5 times http://www.telegraph.co.uk/finance/markets/9196093/Graphic-50-years-of-the-FTSE-All-Share-index.html The DOW Jones looks like it went up by ca 8 times http://www.tradingeconomics.com/united-states/stock-market You could do some calculations here http://www.online-calculators.co.uk/interest/compoundinterest.php |
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Share growth is of course another significant factor
http://monevator.com/uk-historical-asset-class-returns/ |