Buy-to-let leading major asset classes: report

Buy-to-let leading major asset classes: report

Buy-to-let property achieved better average returns than other major asset classes over the past 18 years but should not be treated as a passive investment, research has claimed.

In the 32-page report Buy to let Comes of Age: Eighteen Years of Investment Performance Data on buy to let and Other Major Asset Classes, author Rob Thomas found that every £1,000 invested in an average buy-to-let property bought with cash in the last quarter of 1996 would have been worth £5,071 by the last quarter of 2014.

The same investment in UK commercial property would have grown to £4,494, while an investment in UK government bonds would be worth £3,329.

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Investment made in the fourth quarter of 1996What the £1,000 investment would have grown to by the fourth quarter of 2014
Average buy to let property bought with cash£5,071
Commercial property£4,494
UK government bonds£3,329
UK equities, measured by the FTSE All Share Total Return Index£3,119
Cash, measured by one month sterling Libor£1,959

Source: Wriglesworth Consultancy

Mr Thomas warned investors that buy to let could not be treated like a passive investment.

Writing in the report, published by the research division of Wriglesworth Consultancy, he said: “Buy-to-let is fundamentally different from asset classes such as equities, gilts or cash. While these other investments are passive - once the investment is made you are relying on others to deliver the returns - buy-to-let is more akin to a business.”

He warned landlords may face issues including finding tenants, adding: “Unlike a share certificate which can be placed in a drawer and left, buy to let can never be an entirely passive investment.”

He said residential property prices showed low price volatility since 1996 but residential property was illiquid in comparison to UK equity.

Adviser view

John Stirling, chartered financial planner for East Anglia-based Walden Capital, said: “I have been looking at how to get exposure to the residential market without the hassle of buy-to-let for our clients but it is hard to do this in a liquid and straightforward way.”