We use cookies to improve site performance and enhance your user experience. If you'd like to disable cookies on this device, please see our cookie management page.
If you close this message or continue to use this site, you consent to our use of cookies on this devise in accordance with our cookie policy, unless you disable them.

Close
In association with

Home > Opinion > FTAdviser Blog

Letter: Property, safe as houses?

By FTAdviser Blog | Published May 03, 2012 | Mortgages | comments

This island boasts amazing beaches and remains relatively unspoiled. Yet, after the property bubble burst, there are now many modern ghost villages and half completed concrete shells blighting the landscape.

This got me thinking about a chat with a new client who, up until now, simply cannot see past UK buy-to-let and residential property as being the only investment solution.

I have suggested that he should never own so much of one asset that he can make a killing from - or be killed by, and that diversification is a friend.

I emailed the list below – which is by no means exhaustive – but seeks to point out that property (whether home or abroad) is not the be all and end all it is cracked up to be:

• The days of easy double digit annual capital appreciation appear over.

• The cost of ‘gearing up’ has increased significantly since the banking crisis of 2008 as buy-to-let interest rates rise and lending criteria tightens.

• There is a need now for large deposits, 30 per cent meaning tying up a lot of capital.

• If you are lucky enough to make a capital gain, then gains tax is payable over CGT allowances.

• Property is the only asset class to create personal negative cashflow. If the property hits void/empty periods it will cost in council tax, interest and increased insurance costs.

• If you use an agent they skim around 15 per cent off rental return.

• Costs of acquisition and disposal are high, including stamp duty.

• A three-bed, ex-council property that was yielding 10 per cent yearly is now worth 25 per cent less than when you bought it – it is illiquid.

• Maintenance costs and other landlord expenses eat into the real return.

• When you die, your whole property portfolio gets hit for 40 per cent inheritance tax, a nasty sting in the tail

• All landlords are required to be registered now.

• Where your tenant is naughty it will be you who gets the anti-social behaviour order.

They did not seem to mention any of this on the television shows Location, Location, Location nor on A Place In The Sun.

I have hopefully given my client some food for thought that for long term investing, other asset classes warrant his attention.

Now, where is that cold San Miguel?

Iain Wishart

Wishart Wealth Management

Edinburgh

COMMENT AND REACTION

Our Columnists

Hal Austin

Hal is editor of Financial Adviser and has been for more than a decade. He has previously worked on a number of local and national publications.

Ashley Wassall

Ashley is editor of FTAdviser and writes on all areas of retail finance. Previously supplements editor at Money Management and editor of a European private equity publication.

John Kenchington

John is editor of Investment Adviser and has written about investments for several years. He has worked at titles including City AM and was recently named in the MHP 30 To Watch list of up-and-coming media names.

Jon Cudby

Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

Tony Hazell

Tony is a freelance financial journalist, having been editor of Money Mail at the Daily Mail for a number of years. He has been writing a column in Financial Adviser since 2005.

John Lappin

John is a weekly contributor to Investment Adviser with 15 years’ experience in financial journalism and 10 years writing on the IFA sector. He was formerly editor of an IFA trade magazine.

Most Popular
More on FTAdviser
FTA jobs