Property and your portfolio

property portfoilio for pensions 4 Dec

Property and your portfolio

Is property an asset?

This is a difficult question for younger people as they have a lot of emotion surrounding property and emotion is a liability when it comes to investing and looking after your finances. It is most definitely an emotional asset especially when you need your own space and to get away from your parents’ nest, or you have been homeless, or sick of paying rent. We all remember the lecture from our folks about using their home like a Hotel. It can be very exciting to start on the property ladder and have your own space at the same time.

Property Developers on the other hand have little emotion, they can buy up a large semi in London and the history is meaningless to them as they rip it out and get as many people in on many floors and get as much rent from Multiple Home Occupancy as they can. Turning a property and getting it occupied around in months.

A house unquestionably meets that definition. A financial statement will list a house in the “asset” column. If there is a mortgage on the property, it will appear in the “liability” column. The difference between the asset value and the loan (liability) is the equity

Robert Kiyosaki

“One of the weakest performers [is] your own personal real estate, because it doesn’t provide much income,”

“It’s an inflation hedge. You do a little better than inflation, and you can have your own home, so there’s a psychological, emotional benefit.”

Instead, millennials in a position to buy property should be considering how to do so in a way that will provide them additional cash flow, If you can own real estate, real estate with an income is the one [form of] real estate that’s more valuable,”

Tony Robbins.

The rule of thumb is property doubles in price (very) roughly every ten years, if you are prepared to pay your mortgage for that time and live in your property then it becomes an asset.

Property Ladder

First-time buyers’ dreams of home ownership are hanging by a thread after a clampdown by banks and building societies.

However, it is getting harder and harder for younger people to buy their first home.

  • More lenders ending mortgage offers for borrowers with 5% and 10% deposits
  • This has left many young buyers ‘effectively barred’ from the housing market
  • Experts predict first-time buyer sales may plummet 25% because of pandemic
  • Many first-time buyers were hoping to snap up a bargain with lock down easing 
  • Broker sees 212% increase in first-time buyer inquiries between April and May 
  • Economists are predicting a 4% fall in house prices this year

A rapidly rising number of lenders have ended mortgage offers for borrowers with 5 per cent and 10 per cent deposits. 

THE average deposit for a first-time buyer has risen by a quarter to almost £50,000 – fueling fears that some struggling families will never be able to buy a home of their own.

Savers not only need more cash due to soaring house prices, but loans for smaller deposits have almost disappeared in recent months.

The move has left many young buyers ‘effectively barred’ from the housing market, with some

The average deposit for a first-time buy is £47,059 — up from £37,761 in a decade.

Yorkshire Building Society found that savers trying to build up a 15 per cent deposit face waiting ten years or more in the south of England, based on typical monthly savings figures.

Experts predicting a 25 per cent fall in first-time buyer sales because of the pandemic.

Earlier this week, we revealed how a mortgage crunch had seen the number of small deposit mortgages on offer dive by more than they did in the first year of the financial crisis.

‘Effectively barred’: Many first-time buyers had been hoping to snap up a bargain now sales can go ahead again, but without a large deposit they may struggle to get a mortgage.

The bad news for first-time buyers comes as many had hoped to snap up a bargain now lock down is easing, and sales can go ahead again. 

Mortgage broker Trussle reported a 212 per cent increase in first-time buyer inquiries between April and May.

But concerns over falling property prices have left banks reluctant to lend to borrowers with less than a 15 per cent deposit, for fear they could end up in negative equity, where the owner owes more money than their house is worth.

Be prepared to be realistic

Buying your first property can be a really exciting time but it’s crucial that you remain level-headed and realistic at every step of the process. That can mean compromising on location or simply being patient about the amount of time buying a property takes – it can be months between putting in an offer and finally having the keys in your hand.

You also need to look long term and be realistic about the ongoing costs of owning your property. Will you be able to afford repayments if the interest rate rises? Have you budgeted for utility bills and upkeep and maintenance on your property? Having a survey done can be an expense some first time buyers are tempted to skip but getting a heads-up on potential issues can help you keep a clear head when making an offer.

Some economists are predicting a 4 per cent fall in house prices t in 2020 the largest decline in more than a decade. Estate agent Savills says prices will fall 7.5 per cent.

Overall property is still an asset if you see it as one, as long you are prepared to ride out the negative equity of the first decade and make it your home as well, then you should feel quite proud of yourself as you are starting to understand the basics of finance.

Property Portfolio

Fast forward 10-15 years (we did say ‘profitable Investing’ is a study of time!)  and now you have some good equity in your home, don’t just sit back now and spend the savings you are making on your mortgage payments especially if they are fixed from the day you moved in. Start looking at ways to buy more property or move to a bigger house and rent out your starter home to other starters.

Real estate has a low correlation to stocks and bonds. Because it’s a lagging economic indicator — it rises and falls well after the rest of the economy — it moves differently than stocks or bonds. What’s more, real estate markets are unique. The factors that can sink home prices in one market can have no bearing on another, though not always.

I sold mine in 2005 lucky me eh!

Property Experts forecast house prices in the UK will grow 15% over the next 4 years. They support their outlook with a forecasted 68% rise in GDP, 6.9% rise in household disposable income and a 2.7% increase in employment.

The fears over the end of globalism and reduced trade are easing. Once Covid 19 is beaten, the world will enter a period of euphoria and optimism which should fuel spending. That new spending could fuel more home construction in the UK. As you can see, housing construction is brisk again.

Most sophisticated investors recommend a 5 percent to 10 percent allocation over your overall portfolio.

Many good financial advisors have managed savings plans that have property investment inside their plans, and the best one can give you digital control to make changes to your portfolio by choosing what percentages of what asset class you want to buy or sell, giving you good control all managed by established investment experts who you can mirror and trade what they are doing, and learning along the way.

Grab a coffee with our experts and see how you can customise your finances and be a integral part as much as you want.

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