I think this is bit of a non starter. The days of considering property as investments are nearly dead.
Initially the rates of returns look quite attractive until the tax man removes all of the core expenses from the allowable section. This essentially is just fabricating a inflated tax bill forcing property investors to relinquish their property because they can't take the pain any longer, eventually the government can re allocate it as social housing.
I believe there is also a disconnect how our own property is viewed. Its often argued as an investment and as it stands this is the only area free from Capital Tax Gains (Until of course its subjected to IHT when passed down in a estate). Whilst this is attractive, this should be just viewed as our home where we choose to live and are happy with the location it offers. Not a vehicle for speculation.
I find it fascinating how the views of the UK and the US differ. Essentially the UK has historically become an an 'inherited nation' relying on property and land values to be passed down through generations 'creating wealth'
US on the other hand has never really experienced such huge increases in their land value so its forced to find value elsewhere and become entrepreneurial as a result. This may explain why the combined value of the just the top 7 stocks in the US is worth a combined $16 trillion, with the FTSE100 falling far short of £2.17 trillion.
Thanks Vicky, great read. I always find it weird how averse UK investors are to stocks (vs US investors who will take leveraged positions on margin) but be willing to take a 4x leveraged position on a second property with zero diversification. I personally think gold gets overlooked in the UK too. Part of the reason people gravitate to property is it is a tangible hard asset, and isn’t reliant on future profit generation like stocks. Gold fits the bill too, is super low cost to own / maintain and has tax advantages. Over a similar timeframe I would guess it has outperformed both
There are intangibles to consider in both owning shares vs housing. First, the great benefits of living in a house where you are raising a family - creating a home. There is real psychic value to that stability that one might only realize when you are a tenant.
On the other hand, the cost of owning shares - ownership in an operating business - is negligible until one sells. No new roof to put on, hot water heater to replace. The trick is to remember that you own a business rather than some red or green symbols that periodic go haywire -Ben Graham’s voting machine vs weighing machine analogy.
I recently wrote something myself in a similar vein, on home ownership vs a rent-and-invest strategy. Bottom-line is: home ownership is generally preferable
Let's not conflate owning your own home and a buy-to-let. Yes, the latter might make a good investment but is owning your own home an investment? It might be for your children when they inherit but for Mum and Dad it's mainly a roof over their heads.
Yep i think this is valid - i do conflate the two and owning your own home isn’t primarily an investment. Just think historical attitudes in the UK have been too pro property! Hopefully this is/has changed.
They aren't morally equivilent though, doing B2L to buy an investment one can't afford to repay the leverage on predicated on the understanding that some other person's income will service the mortgage during a housing crisis is a moral obscenity.
I think this is bit of a non starter. The days of considering property as investments are nearly dead.
Initially the rates of returns look quite attractive until the tax man removes all of the core expenses from the allowable section. This essentially is just fabricating a inflated tax bill forcing property investors to relinquish their property because they can't take the pain any longer, eventually the government can re allocate it as social housing.
I believe there is also a disconnect how our own property is viewed. Its often argued as an investment and as it stands this is the only area free from Capital Tax Gains (Until of course its subjected to IHT when passed down in a estate). Whilst this is attractive, this should be just viewed as our home where we choose to live and are happy with the location it offers. Not a vehicle for speculation.
I find it fascinating how the views of the UK and the US differ. Essentially the UK has historically become an an 'inherited nation' relying on property and land values to be passed down through generations 'creating wealth'
US on the other hand has never really experienced such huge increases in their land value so its forced to find value elsewhere and become entrepreneurial as a result. This may explain why the combined value of the just the top 7 stocks in the US is worth a combined $16 trillion, with the FTSE100 falling far short of £2.17 trillion.
Thanks Vicky, great read. I always find it weird how averse UK investors are to stocks (vs US investors who will take leveraged positions on margin) but be willing to take a 4x leveraged position on a second property with zero diversification. I personally think gold gets overlooked in the UK too. Part of the reason people gravitate to property is it is a tangible hard asset, and isn’t reliant on future profit generation like stocks. Gold fits the bill too, is super low cost to own / maintain and has tax advantages. Over a similar timeframe I would guess it has outperformed both
Another good piece - thank you.
There are intangibles to consider in both owning shares vs housing. First, the great benefits of living in a house where you are raising a family - creating a home. There is real psychic value to that stability that one might only realize when you are a tenant.
On the other hand, the cost of owning shares - ownership in an operating business - is negligible until one sells. No new roof to put on, hot water heater to replace. The trick is to remember that you own a business rather than some red or green symbols that periodic go haywire -Ben Graham’s voting machine vs weighing machine analogy.
Excellent write up, thank you.
I recently wrote something myself in a similar vein, on home ownership vs a rent-and-invest strategy. Bottom-line is: home ownership is generally preferable
https://open.substack.com/pub/showmethevalue/p/renting-v-buying-in-the-uk-which?r=1ukiw6&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false
Let's not conflate owning your own home and a buy-to-let. Yes, the latter might make a good investment but is owning your own home an investment? It might be for your children when they inherit but for Mum and Dad it's mainly a roof over their heads.
Yep i think this is valid - i do conflate the two and owning your own home isn’t primarily an investment. Just think historical attitudes in the UK have been too pro property! Hopefully this is/has changed.
Totally agree....Society needs to reconfigure the viewpoints on this.
They aren't morally equivilent though, doing B2L to buy an investment one can't afford to repay the leverage on predicated on the understanding that some other person's income will service the mortgage during a housing crisis is a moral obscenity.