‘I will tell you how to become rich. Close the doors. Be fearful when others are greedy, be greedy when others are fearful.’
Warren Buffett (Investor, Billionaire and Philanthropist)
Investment Property Agency translation – Now is the time to invest in property. It is almost always best to act opposite to the herd and remember property investment is a long term strategy so entering in a downturn represents a fantastic opportunity.
For those unfamiliar Warren Buffett is America’s 2nd richest individual, behind Bill Gates, with an estimated net wealth of $ 39 billion and arguably the greatest investor of all time. Warren Buffett rarely changes his long term investing strategies, no matter what the short term market does, and believes you are far more likely to succeed with a buy and hold strategy than short term trading. Indeed his favourite holding period is forever. The point to be taken from this is that investment, of any kind, must be viewed long term and not as a short term ‘window’ which is merely speculation.
The current focus on property investment is largely as a result of people looking for another investment they can rely upon for their future, after the failure of the stock market to regain the heights of the late 1990s and the huge uncertainty over pensions.
If you look at the stock market most people remember when the ‘Dot Com Bubble’ burst in 2002, and saw the FTSE 100 drop 25%, but few recall the boom itself which was enjoyed for many years previously. Equally, people are aware that house prices in Edinburgh have dropped some 10%, since the peak of 2008, yet we must remember over the last 10 years they have risen by over 100%. The FTSE 100 is similarly down some 10% since the start of 2008 but is actually lower than it was at the start of the Millennium, meaning a negative return on investment. The returns in the UK property market have not only outperformed the stock market over the last 10 years but have outperformed for the last 20 plus years. Looking back to 1985 the FTSE 100 has increased by 387%, as of today, however the average Edinburgh Property has increased by 422%. The figures I have quoted exclude any income by way of rental and dividends and assume that the property has been purchased outright. Property growth should perhaps be considered in relation to the actual deposit paid and had the deposit been 25%, with mortgage payments covered by rental, then the actual return on capital would have been 1688%. I shall explain the power of ‘gearing’ in another article.
The point, once again, is that you must look longer term to obtain an accurate picture of performance and given the last 25 years I would expect property to provide a healthy long term return and to continue to outperform other forms of investment.
‘Unless you can watch your stock holding decline by 50% without becoming panic stricken, you should not be in the stock market’.
Warren Buffett (Investor, Billionaire and Philanthropist)
