Why Invest In Property?

What are the key reasons to invest in property?

One simple answer is that over time, property goes up in price, and that's good. But this is too simplistic. How sure can you be that it will continue to do so, and what are the other reasons to invest in property?

Whether you plan to invest in the UK or elsewhere, the price of property in a free market is governed by two key factors:

The balance of supply and demand
The availability of finance

There may be other short term factors such as taxation and the economic health of the nation which, short term, distorts the longer term cycle.

In the UK it is easy to see that long term, demand will continue to outstrip supply. Why?

Here are some fundamental facts:

We live on an island with an increasing population and no more land. In fact our Government estimates are that we will need at least another 1 million homes just in the South East in the next 25 years!
Builders are continually failing to build the required number of homes, all the more so since the fall in property prices between 2007 and 2009. House price starts have fallen from about 150,000 a year to 50,000 a year - at a time when we need at least 200,000 new homes to meet estimated demand.
Restrictive planning policies make it difficult to meet Government annual targets for construction
People are living longer, which means houses take longer to be 'recycled'
More couples are divorcing, which means there is a growing demand for more and smaller properties
Fuel and transportation is increasing in price, which means moving to the city is still in demand

These facts are not new. Historically, house prices have risen by around 8% per annum for the past 40 years. Prices have doubled approximately every ten years since the 1950's. Undoubtedly house prices will rise in the future, the questions are by how much and how fast?

House price rises are only one reason to invest in property. There are many more, of which these six are the most important:

Leverage

If we were to pick just ONE reason to invest in property it would be this. Property is the only asset class where you can use other people's money to finance your investment - at a level varying between 65% and 100%.

Why does this matter? Because using other people's money makes a massive difference to the level of your return.

Quick example: Suppose you purchase a house for £100,000 that doubles in value over 10 years. Now it's worth £200,000. If you paid cash, you would have made £100,000 profit - a 100% return on your cash.

Now suppose you paid £100,000, but borrowed £75,000. You invest £25,000. You still make the £100,000 profit, but now it's a 400% return on your capital.

Because leverage makes such an enormous difference to your future profit it sets property investment a world apart from any other asset class.

Rental Return

Invest wisely and property can provide a superb rental return - your regular income - that increases year on year. Invest in a building society and neither your capital nor your income grows. Invest in property and both your capital and your income grows.

This provides two benefits - insurance against inflation, and an income flow that continues to increase long term.

Invest with Axis and we can offer you opportunities to invest in property with a 15-20% net annual income yield.

Security

Should you need to borrow money in the future, your property portfolio provides the very best security for lending.

Risk Reduction

Asset classes such as stocks and shares can lose their entire value overnight. This just doesn't happen with property. Provided you never have to sell in a downturn, then you can be assured that long term you will make a profit from property.

At Axis we have other strategies - such as buying Below Market Value - that further reduce the risks by building in equity when you purchase property.

Time efficiency

Do things the right way and you can own a significant portfolio with very little time commitment.

Wealth

Last but definitely not least. We simply don't know of any other asset class which can deliver such high returns with modest risk! But only if you get it right - and that's what Axis will help you do.

The opportunities to generate real profit from property investment are huge. To become an Axis client join us now.